# Bergman & Beving _The magical power of a simple ratio_ --- Two Swedish engineers, Arvid Bergman and Fritz Beving, spent the industrial revolution working in Germany and England. They came home in 1906 convinced that Sweden was about to industrialise fast, and that the foreign suppliers who would equip it lacked the local knowledge to sell into the Nordics. So they set themselves up as importer and agent, the bridge between the two. Seventy years later the company listed on the Stockholm Stock Exchange with a market cap of roughly SEK 300 million. Today, the combined market value of Bergman & Beving and its offspring runs into the hundreds of billions of SEK - six separately listed companies running the same operating system, all tracing back to a metric invented in 1981. --- ## The 45% rule Anders Borjesson joined Bergman & Beving in 1976 as an external auditing consultant. By 1979 he was in group management, eventually becoming CEO in 1990. But it was in 1981 that Borjesson, alongside his mentor Torsten Fardell, invented the metric that would become a defining characteristic of the "Swedish model": **EBITA divided by Working Capital**. The formula was EBITA / (Inventories + Receivables - Payables), with a target of **45% or higher**. Why 45%? The logic was simple. At that level, a company generates enough cash that one-third goes to taxes, one-third to dividends, and one-third to reinvestment. The business is self-funding - no external capital is required, growth compounds from operations alone. Why working capital instead of total capital? Bergman & Beving's businesses were trading and distribution - not asset-heavy manufacturing. Working capital management determined profitability. This simple ratio developed into a strategic tool - the Focus Model - that created clear strategic priorities for individual businesses: - **Above 45%**: Focus on growth (organic and acquisitions) - **25-45%**: Improve margins and working capital turnover - **Below 25%**: Focus purely on margin improvement Every subsidiary understood the metric, every employee could calculate it, and that simplicity was the point. EBITA/WC above 45% meant growth. Below 25% meant fix or exit. In between meant improve. --- ## Internal academies Börjesson also built internal academies - a deliberate approach to transform engineers into business professionals. Established in the 1960s, these academies fostered collaboration and networking across the group while building a feedback loop for improvements in sales, exports, customer service, and capital allocation. In the 1980s, Bergman & Beving spent close to 10% of its cost base on these programmes; employees shaped by the academies made contributions that far outweighed the programme costs. When Addtech and Lagercrantz spun off in 2001, they codified this culture into a book called *The Idea and the Soul* (Tanken och själen). Approximately 80 pages, distributed to all employees to convey culture, strategy, and value creation. Written so anyone can understand it, with practical examples showing how the P/WC metric drives decisions. The book remains a core onboarding tool across all six offspring (detailed below). --- ## The offspring What started as one company in 1906 is now six listed entities. **Addtech** (split 2001) - High-tech products for industrial markets. EBITA/WC above 70%. The highest performer: a 100-bagger-plus since 2001. **Lagercrantz** (split 2001) - Niche industrial technology with proprietary content. Highest margins in the family. A 70-bagger-plus since 2001. **AddLife** (spun from Addtech 2016) - Life science: diagnostics, medical devices, lab equipment. The only family member focused on healthcare. **Momentum Group** (spun 2022) - Industrial components and services. EBITA/WC near 60%. Pure B2B industrial specialist. **Alligo** (emerged 2022) - Workwear, tools, consumables. The only retail-facing member, operating Swedol and Tools store brands. **Bergman & Beving** (the original) - Now focused on niche B2B technology companies. Ten people at headquarters. All six still use the EBITA/WC metric. All six target 45% or higher. The operating system Borjesson built in 1981 runs across tens of billions in combined revenue. --- Borjesson proved that radical simplicity can govern a complex portfolio. No elaborate balanced scorecards. No cascading KPIs. One ratio. The Swedish serial acquirers that followed learned from this tradition. The specific tactics vary, but the underlying insight remains: simple metrics, understood universally, drive better capital allocation than sophisticated frameworks understood by few.