Very few companies knew what they were doing, and the question ‘why?’ weirdly enough is often forgotten.

The mother company

Bergman & Beving was founded in 1906 by engineers Arvid Bergman and Fritz Beving. Both had worked in Germany and England during the industrial revolution. They foresaw rapid industrialisation in Sweden but recognised that foreign industrial suppliers lacked local knowledge to sell into the Nordics. The solution: create an importer and agent to bridge the gap.

The company listed on the Stockholm Stock Exchange in 1976 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 architect

Anders Borjesson joined Bergman & Beving in 1976 as an external auditing consultant. He famously saved the firm millions by spotting a tax declaration error — the year of the IPO. By 1979 he was in group management. By 1990 he was CEO.

Borjesson noticed something that shaped everything that followed: very few companies knew what they were doing, and the question “why?” was weirdly often forgotten.

With mentor Torsten Fardell, Borjesson developed a framework of four questions to analyse businesses. The most important: “What are we doing with the good or bad?” The mandate was clear — improve, sell, or wind up units not meeting the hurdle.

The hurdle itself became the innovation.

The 45% rule

In 1981, Borjesson and Fardell invented the metric that would define Swedish serial acquirers: 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 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.

The Focus Model that emerged:

• 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. The simplicity was the point.

Internal academies

The metric alone wasn’t enough. Börjesson built internal academies — training programmes that transformed engineers into business professionals. Established in the 1960s, these academies created 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. The investment compounded: employees shaped by the academies made contributions that far outweighed the costs over decades.

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. Simple enough to read in an afternoon. Deep enough to guide decades of compounding.

The 2001 split

By 1989, Bergman & Beving had grown to 60+ companies. The portfolio had diversified — electronics, mechanics, medical technology, tools, workwear. Borjesson concluded that focus generates shareholder value. A conglomerate discount was destroying what the operating model created.

In September 2001, Bergman & Beving split into three separately listed companies:

Lagercrantz — Electronics, IT products, cabling, communication Addtech — Electromechanics, mechanics, medical technology Bergman & Beving — Tools, workwear, PPE for construction and industrial markets

Each shareholder received proportional shares in all three. The operating system remained intact across all of them.

Results under Borjesson (1976-2001): 18% annual EPS growth, 25% annual total shareholder return, 160+ acquisitions with 85%+ success rate.

The offspring

The family tree kept branching. 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.

What the splits teach

The conventional wisdom is that conglomerate synergies create value. Bergman & Beving proved the opposite: focus through separation creates more.

Each split allowed:

• Management focus — running one type of business well instead of many adequately
• Shareholder clarity — investors could choose their exposure
• Acquisition discipline — each entity competes for deals in its domain
• Accountability — no hiding mediocre units inside a diversified whole

The combined returns tell the story. Anyone who held Bergman & Beving through all the splits — never selling, just collecting the spin-off shares — earned roughly 22% annually for over two decades.

The mother company became smaller than its children. That was the point.

The inheritance

What made Bergman & Beving special was never scale or sector. It was the clarity of one metric understood by everyone. EBITA/WC above 45% meant growth. Below 25% meant fix or exit. The space between meant improve.

Borjesson’s contribution was proving that radical simplicity could govern a complex portfolio. No elaborate balanced scorecards. No cascading KPIs. One ratio that captured whether a business deserved capital.

The Swedish serial acquirers that followed — Lifco, Indutrade, Judges Scientific imitators — all learned from this tradition. The specific tactics vary. The underlying insight remains: simple metrics, understood universally, drive better capital allocation than sophisticated frameworks understood by few.

Six listed companies. One operating system. Hundreds of billions in combined value. All from a tax error spotted in 1976.

Connects to Field Notes: EBITA-WC

Connects to Library: The Compounders · Process Power · Optionality · Scale Economies

See also: The Addtech Succession — The best-performing offspring: four CEOs, one system, a 130-bagger. Proof the operating model transfers across generations. The Roper Model — Same single-metric governance (CRI vs EBITA/WC), same radical simplicity. The Lifco Way — The heir apparent: same decentralisation, same Swedish tradition.