Exposing Solutions 30 | The Acquirer's Multiple®

During his recent interview on The Acquirers Podcast with Tobias, Jamie Powell, reporter at FT Alphaville discussed Exposing Solutions 30. Here’s an excerpt from the interview:

Tobias: In that period of time, what are the biggest stories that you’ve identified? You’ve been able to pull anything out of just looking at the reporting?

Jamie: I think Solutions 30, which is the company I mentioned earlier. If you want to find one to read about, I still remember when– Muddy Waters are short, so it’s going to be worth looking at it. Also, everyone was trying to figure out why. I talked to a lot of good short sellers in San Francisco, that kind of the San Francisco short seller crew and they couldn’t figure it out. They were like, “It looks weird, but I can’t really see.” I remember [laughs] first story was just an overview of the business. It’s a man in a van outsourcer.

So, it goes around installing broadband connections, electric car charging stations, gas smart meters. Really last mile, low margin, low growth business, but they had better margins in all the people that were supplying, and it was growing at 60% a year, and it was a rollup. So, it’s going around, basically, buying lots of mom-and-pop stores in Europe, plugging them into their big contracts.

It was a bit of a weird one just stepping back. But I started to overview of the business and I was looking through their 2017 accounts, and they had Excel tables in the footnotes for the accounts where you have your receivables balance. They had the Excel errors still in the numbers. So, they had an even like– and this was in their English accounts. Their French accounts were slightly better. But then you go back to their 2013 French accounts, it was like a scan of a document through a printer, but it looked like it has scanned like five times.

So, you couldn’t really read half the text. This was a company with a €1.2 billion market cap. So, I did a story being like, “Look at this weird company. It’s called–” It had a hundred subsidiaries. It had a subsidiary in one of the French-Caribbean islands, in North Africa, and in Eastern Europe, and it’s just a man in a van company who operated in five countries. It should not be this complicated either.

So, I did an overview, and then, I spotted after I wrote about the company, the company started removing all their annual reports from their website and replacing them with better versions. Because obviously, when you’re writing a negative story about a company, and I do think this is something we don’t understand, there’s a lot of toing and froing between you and the company being like, “Hi, I’m writing a story about you guys. Here are my questions. Here’s the cut and jib of the story, what is going to be about. Do you have any comments? Do you want to answer my questions?”

Sometimes, they just don’t reply and then get very angry when the story is published. Sometimes, they reply at length, and try and confuse you, and keep you asking more questions. So, I had a bit of back and forth with the company. But as I was having the back and forth, they started pulling these annual reports off their website. Luckily, I suspected they might do that, so I had them saved. So, I went back and looked and I noticed in their 2017 annual report that they were audited by Grant Thornton at the time, and at the beginning of the annual report, they had the audit letter on the first– I know most companies don’t have to write the back of the annual report, but they had right at the front. I noticed that it looked like the English version of the audit letter had been translated by them and made in a Word document, it didn’t have the same logo with the Grant Thornton. It had a different logo. The text was kind of skewy. It was cut off at some–

Basically, they printed it out, cut it out, put it on a piece of paper, then scanned it again to make it look like it was a scan. They also copied and pasted the signature of the Grant Thornton auditor over to the English letter. And of course, if you want to get an English version of your audit letter, surely just say to your auditor, “Hey, can you just do a translate? Well, we’ve done the translation. Here it is. You just send it over.” I, now say, I doubt they’ll charge you a fee, but they might go, “Yeah, that’s €100,” whatever it is.

The fact they went to this length was just very odd. I think that’s when I knew that this business– and I don’t think I mentioned earlier but what happened was that in last December, an anonymous [unintelligible [00:44:18] report came out about the company accusing them of laundering money for the mafia, and then Ernst & Young refused to sign off on their accounts in May citing– I can’t remember the exact language, but citing related party transactions with members of management that they couldn’t verify the substance of and share price went down 80% on the next morning.

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