“The margin compression this quarter is a function of digesting acquisitions and should mean-revert as newly acquired businesses get integrated onto the CSU playbook.”
Won’t margin always be under attack? When are they ever free of this compression when they are constantly acquiring new companies that will always cause new margin compression?
It really depends on the characteristics of the businesses being acquired.
The latest acquisitions are particularly margin-compressive, i.e. .carve-outs of distressed, lower-quality assets that need to be restructured and optimized. If CSU executes, in time you’ll see margins go up.
When they acquire higher-quality businesses, they can come in with much better margins from day one.
Thank you very much for writing this up! Great job.
Glad you liked it, Jan! 🤝
Good write-up and breakdown!
Also great articles. Thank you!
“The margin compression this quarter is a function of digesting acquisitions and should mean-revert as newly acquired businesses get integrated onto the CSU playbook.”
Won’t margin always be under attack? When are they ever free of this compression when they are constantly acquiring new companies that will always cause new margin compression?
It really depends on the characteristics of the businesses being acquired.
The latest acquisitions are particularly margin-compressive, i.e. .carve-outs of distressed, lower-quality assets that need to be restructured and optimized. If CSU executes, in time you’ll see margins go up.
When they acquire higher-quality businesses, they can come in with much better margins from day one.