Spyglass Investment Strategy Overview
10
New Position: API Group Corp. (APG)
API
Business Overview
GROUP
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API Group (APG) is the leading business service provider of safety and specialty services worldwide
Founded in 1926, APG operates the largest fire safety business in the world
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APG estimates US Fire Safety Industry expected to reach $18 billion in 2025, while growing at a 9% CAGR
Customers buy APG's services because of government regulation and safety concerns
Attractive Industry Characteristics
→ Recession resistant
Demand is largely inelastic with pricing
Recurring mandatory inspections and contractual obligations with a transparent view of backlog
Limited CapEx enables an aggressive M&A strategy
→ APG has completed over 90 acquisitions since 2005 with an average EBITDA multiple of 4-7x
→ Inspection sales team enables significant margin expansion post-acquisition
Organic growth is driven by increased regulatory standards and pricing power
Go-to-market strategy: Sell inspection first which brings $3-4 in service revenue for every $1 of inspection
revenue, creating a stickier client relationship with recurring revenue and higher margins
10-year track record of high single digit organic growth led by inspection volume growth and pricing power
"Being in businesses that are mandatorily required services, it's a great place to be"
- API Group Chairman, Martin Franklin
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