It is often said that 60% of all acquisitions lose money - a phenomenon known as “buyer’s curse”, whereby over-zealous bidders overpay for strategic assets. Not so FastForward, where we were encouraged to hear at yesterday’s interims that all 9 investee companies have either maintained or increased their valuation.
Granted it is still early days, albeit we think this enviable ‘hit rate’ is a credit to the management team, who together possess vast M&A experience and have remained steadfast to the core principles of: 1) only buying stakes in high growth stocks within FFWD’s target verticals (ie technology and life sciences), and 2) “walking away” from deals which are unlikely to generate superior returns commensurate to the risks.
With regards to the financials, net assets rose 3.3% from £10,270k to £10,614k (7.92p/share) as at 30th September, vs 10.6% and 15.0% gains respectively on the FTSE All Share and AIM indices. That said, stripping out plc fees, salaries, due diligence and other corporate overheads (total £671k) – FFWD’s NAV would have actually climbed 9.9% thanks to favourable investment gains and forex (£ devaluation). A decent outcome, given that the portfolio consists entirely of unquoted start-ups, most of which under IAS rules currently have to be stated at original cost.
Going forward, in order to further boost returns, generate economies of scale and leverage central costs over a bigger capital base, we believe the Board may consider executing a lower number of larger transactions (perhaps even taking controlling interests). With that in mind, CEO Lorne Abony has travelled extensively in H1 - evaluating potential new targets and providing support to investee companies – along with building a small, high-performance team (eg Norbert Teufelberger and Josh Epstein) to enhance deal flow, improve due diligence and ensure that (if required) the Board can complete transactions expeditiously.