MBH Corporation PLC (M8H.DU) Focus on Small Business for Big Success

MBH Corporation PLC (M8H.DU) Focus on Small Business for Big Success

MBH Corporation PLC (M8H.DU) Focus on Small Business for Big Success

MBH will use the Agglomeration model to turn small business acquisitions in to a large successful company.

For MBH to achieve its economic objectives, it will identify and acquire good, well run, profitable and debt free small businesses.

Unlike traditional models, MBH are neither looking to ‘strip and flip’ the businesses acquired, nor are they interested in proving management to struggling businesses and hoping they can turn them around where others have failed. Finally, there is no desire to merge all the businesses into a group with a cohesive brand with centralised command and control structure.

The businesses that join are many years old, with a good track record of profits and typically still run by the founder who often has decades of experience in their industry. Inevitably before finding MBH, these founders will have talked to other buyers in the marketplace. Big competitors, Private Equity firms and the like. The reason they are still independent when they come is that they value their independence. They like the way they do business, they like their team and they way it works together. Their brand might not mean much outside of their country or even their niche, but it is their brand and their clients trust it. They have no interest in selling to others but will come to MBH because they allow them to scale in their own way.

Ensuring that they keep that promise to the Founders that join is the key to attracting them and the result of attracting them offers MBH the chance to arbitrage the price a small business can be acquired for and the price a big PLC typically trades at. Therefore the primary purpose of existence is to provide a platform for those excellent, cash producing businesses to thrive under the ownership of MBH.

Equally MBH are not actually offering these business owners an ‘exit’ and therefore do not get drawn into conversations about exit valuations. If founders want to sell their business and leave there are other options out there.

An important part to the puzzle is that in almost every case MBH will be doing acquisitions using stock to compensate the Founders joining. Whilst the constant creation of shares is dilutive, each acquisition will be EPS accretive and offers greater long term value creation for shareholders than using cash.

The entrepreneurs that join are not looking to exit, indeed if they were they might find the initial price at which they swap their stock to be poor compensation for the value they have created thus far. The model provides an ‘earn in’ approach where the more profit they contribute to the holding company over time, the more shares they earn. While not looking for an exit, the companies that join are ambitious. They are looking to scale and they know that they can achieve more under the umbrella of a big PLC then on their own. The continuity that MBH offer them, the ability to get on with the business in hand without worrying about rebranding, or merging with an unknown quantity, allows the founder and their team to keep their focus on the business they are building. This continuity offers a competitive advantage and is one that is fundamental to the business.

The model is ultimately then very simple. Allow good, well run businesses to swap their private shares for public shares but continue to run their business as before. As co-owners of MBH they too benefit when we bring in other companies and enjoy the value creation afforded in the P/E arbitrage.

As companies come in they will sit within verticals under the main holding company. There are no limits to the number of verticals we can create and the benefit that brings to existing companies.

This model is not for every business out there. ‘Debt free, profitable and well run’ already rules out most. Some would choose to go the IPO route alone, still others have trouble believing in a collaborative approach to anything and a 3rd group understands the appeal but don’t yet feel they are ready to join.

This model allows enormous flexibility to work with great companies regardless of sector or territory as long as it enhances shareholder

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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