NIBE back on acquisition path with minor Element deal
Summary
- NIBE has acquired 70% of Italian company Selmo S.r.l., aligning with its strategy to strengthen the Element business area, though the acquisition is minor relative to NIBE's overall scale.
- Selmo, a manufacturer of thermostats and electronic control devices, will complement NIBE's electric heating systems, with local management continuing under NIBE's decentralized model.
- The acquisition marks NIBE's first in two years, potentially signaling a return to its acquisition-driven growth strategy, although the financial impact on the Group is limited.
- Selmo's revenue represents a small portion of NIBE's estimated future revenue, but its EBIT margin of over 10% is expected to slightly enhance the Element segment's profitability.
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NIBE announced on Monday that it had acquired 70% of the Italian company Selmo S.r.l. We believe that the acquisition is in line with the company's strategy and strengthens the Element business area. However, the deal is very small compared to NIBE’s scale, and it does not have an immediate significant impact on our estimates or view of the company. We will update the acquisition to our estimates in connection with the company’s Q3 report at the latest.
A small but strategically suitable acquisition
Founded in 1988, Selmo is an Italian manufacturer of thermostats and electronic control devices for electric heating. To our understanding, some products are tailored in consultation with customers, resulting in customized solutions which we believe should create customer lock-in and high switching costs. Selmo will become part of the NIBE Element business area and will complement its component offering for electric heating systems. According to NIBE, the local management will continue to lead the company, which is a typical and proven part of NIBE's decentralized acquisition model. Selmo is a small company employing 20 people and generating annual sales of approximately 18 MEUR (~197 MSEK). Nibe has not disclosed the exact operating margin, but states that it is well above 10%.
Impact on estimates is minor
The newly announced deal marks NIBE's first acquisition in approximately two years. This follows a period of more subdued activity, characterized by operational sluggishness and elevated leverage, which had prompted a more cautious stance on M&A. We believe this renewed acquisition activity may therefore signal a gradual return to NIBE’s traditional, acquisition-driven growth strategy as its balance sheet capacity improves. However, it is worth noting that the financial impact of this acquisition on the Group is limited. Selmo's revenue represents about 2% of our estimated 2025 revenue for the Element business area and only about 0.5% of the Group’s total estimated revenue. Despite its small scale, Selmo's EBIT margin of over 10% is in line with, or slightly above, the average EBIT margin of companies NIBE has historically acquired within the Element segment over the past decade (typically around 10-12%). Furthermore, this margin is clearly higher than our estimate for the Element business area (2025e: ~7%), meaning it will slightly support the segment's overall profitability. The transaction price was not disclosed, which is typical for NIBE's smaller acquisitions. However, given the very small size of the acquisition, we expect the purchase price to be relatively modest for NIBE. Consequently, we are not making any immediate revisions to our estimates.