Good morning, everyone. Welcome to the Teqnion 2024 Q4 Q&A. It is with embarrassment and anger that we presented our 2024 Q4 report this Saturday. The numbers are truly bad, and they are not close to where we want them to be and expect them to be. Due to the results, I have full understanding that the questions that we have received are mostly revolving, "What are we doing about the situation, and when will it look brighter again?" I would have asked the same. We will therefore start the session by spending some more time discussing these two topics. Johan?
Yep. Thank you. Today is the 17th of February, 2025. My name is Johan Steene. I'm the CEO of Teqnion. I'm sitting here next to my friend and coworker, Daniel Zhang, to try to answer your questions after the release of our year-end report for 2024. To start things off, our business model can be simplified into three key areas. First, maybe our acquisition engine. Second, the larger part of our existing portfolio, companies that deliver strong results and solid returns. And third, the subsidiaries that are currently struggling and require improvement. In the past, we have in these Q&A sessions primarily focused on the third category, the companies in need of improvement. Today, we will aim to provide a broader view and briefly try to cover all three areas. Firstly, if we jump into the acquisition engine managed by Daniel.
Yes. Given that Teqnion is young and small, naturally, acquisition is going to be our biggest growth engine for the years to come. For the last few years, we have not acquired as many companies as we have wanted to. That will change this year. Quite a lot of things have changed with the team and process that makes us very confident that 2025 is going to be at an all-time high when it comes to high-quality acquisitions. We have a new process in place where the acquisition team, that is us, have a larger mandate compared to earlier with three arenas to actually acquire the high-quality companies that we want to. We have also introduced some more specialization. I've been doing this now for four or five years and have learned a lot of things.
During this process, I will now be doing more of that in the earlier processes by myself and through that free up Johan to fix our current struggling portfolio. There is, of course, a lot about reputation and network in the geographies where we have been acquiring. The current pipeline, and especially looking at both the very near-term pipeline and the longer pipeline, have never looked as good. Words are cheap. Everything I can say is that put your trust into that what we're saying is true and keep a lookout for the number of acquisitions and the quality of them. You will be seeing more of those going forward.
Thank you.
Yeah. Yeah. Moving on to the next part of what we do is that we have a strong performance group of companies within the portfolio. It's good for us, at least, to remember this, that the majority of our portfolio is performing as we like. As I mentioned in the Q3 report this fall, only about two-thirds of the group performed well in 2024. That is, of course, not acceptable. We're consistently aiming for a situation where maybe 10% of the group is in need of help, and right now there's too many struggling. The companies within the strong part of the group are delivering good results, and they have somehow successfully adapted to the changing economic landscape by managing their cost effectively, and they have intensifying their sales effort just to continuously generate new business, even though the climate is a little bit tougher.
Looking at trends a little bit, we can see that our U.K.-based companies are generally performing really well, and also the companies that we have in the electrification and the defense sectors. We have currently six subsidiaries operating directly within electrification and defense. In 2024, four of those six did their best year ever. As of today, there is no indication that this positive trend will not continue. The U.K. acquisitions that have been made in the recent years, those companies tend to have higher margins and lower economic sensitivity. They give us better returns on capital, and our ambition to continuously acquire better companies seems to be working as planned. That is, of course, really positive. We are doing more of that. If we come to the part that we spend, or at least myself spend most of my time these days, it is struggling, underperforming companies.
We have, as I just said, this is a too big part of our group today. They have also faced, of course, the economic headwinds, and there we have not been able to rotate quickly enough towards a sustainable path. During the last quarter, we have taken important action to correct this, as I also outlined in the report. We have merged two contract manufacturers into one place. We have significantly reduced staffing in three of the companies, and we have, during this period, also appointed four new CEOs. In addition, of course, we have reviewed costs and worked to optimize production and sales processes. In these cases, having the right person in the right position is always important. In tough times as this, it is absolutely critical, and there we have done a lot there.
We have an example on page eight in the report where we try to illustrate how a new CEO that was joining us last spring has a great business mindset and actively seeks out customers and increases incoming orders. This has been done with over 100% since this person came on board. Once again, this proves that action drives results. Just to bear in mind, in this particular case, this order intake is up really, really well, but the results are, of course, lagging. One important thing when it comes to this right now is that we're more hands-on, and we're much more involved in the subsidiaries, the subsidiaries that need attention. Our CEO coach, Håkan, who previously owned the house building factory, has now stepped back in to run that site again to ensure the productivity and secure profits.
Just the initial impact seems really, really promising, but the coming months will provide a more clear picture, of course. Regardless, this move is expected to save us millions over the course of the year. Me, myself, I have also taken a more hands-on role. I'm working closely with some subsidiaries to accelerate their turnaround moving forward. My focus will be even more defined, ensuring that the right resources are working on the right type of improvements. If there's one common challenge we face here, it's, of course, weak sales, and sales must improve. The reasons why the declining sales, we have the declining sales vary some across the subsidiaries, but each company has a clear and individual action plan on how to return to profitability. Some subsidiaries have already built a much larger pipeline during the quarter, like a pipeline of quotations, I should say.
This is, of course, by pushing a much more active sales effort. It's a positive sign. However, closing these deals remains a challenge. There's still a reluctant sea out there to make decisions. Once again, more activity creates more opportunities, and we're going to make a lot of opportunities. We have acquired these companies throughout the years, and we have acquired them because they can be operated profitably. Every company within the group is possible to run with a profit. In this case, we haven't been able to do that. Just to be really clear, if we fail to prove within a reasonable timeframe and with reasonable resources that we cannot run it profitably, we will not hesitate to take necessary action. There are no sacred cows here.
Our ambition is only and has always been to excel at capitalism, and we must reshape our playing field to achieve the profits we want. We want profits.
Yes. In short, regarding the three areas, we have an M&A part that is firing on all cylinders. We will see a cohort this year that is of higher quality and of a higher number than what we've seen ever. We have a profitable core that is two-thirds, and of course, that's going to be bigger when we get more companies fixed and we have more companies coming into that group. For the third part, which is too big, with the companies that are struggling, Johan is stepping in to help and fix the problem, and it's going to be fixed. With that said, as a very long introduction, we will go over to the actual Q&A. As always, we will alternate between the questions that have come into our QA at teqnion.se and the live questions. All right. Let's start with the live ones.
We have Pedro Leon asking, which one -off costs have you had during the quarter? Relocation, restructuring, expenses, etc.
We have, of course, had some restructuring costs during the last quarter of 2024. Some of them are easy to calculate, but some are, of course, just effects of us doing big changes to subsidiaries, which also makes a lot of turbulence within that organization. Since it's hard to pinpoint a fixed number, we have not decided to show that. Of course, some of our poor performance comes from us taking a lot of costs for restructuring.
Yes. Alexander is wondering. We will see at least six acquisitions this year. Yes. Martin is wondering. Teqnion has stated that underperforming companies will not be divested as it would be sending a wrong signal to the Teqnion family. Under what circumstances or performance criteria would you warrant divestment and thus management ensure that subsidiaries do not become complacent due to assurance that they will always remain in the group?
We have a lot of confidence when it comes to turning things around, but I mean, it's also a responsibility for us and for the people working in companies that if we don't see that they have the ability to sustain, then we, of course, have to do something with them. If it's to wind them down to very small entities and merge them into something different, or if somehow we close them temporarily or permanently, we will make the right decision and we will make the decision necessary in order to get things back on track. There is, of course, just to emphasize that again, we have companies that are able to be run profitably, and it's our job to make that happen. Yeah.
I think just to reiterate that, our intention is that we're forever owners of companies, which means that we're going to do everything we can to make the cash flows go up over time. If for some reason the world changes or that we cannot make that happen, make no mistake, we're going to close them down. We're not in the business of permanent losses. AS is wondering, free cash flow conversion has been down this year and leverage has been rising. How do you expect to fund acquisitions this coming year?
First of all, our key efforts now are towards making us much more profitable, and with the profit we also have within what we do, a better free cash flow. There is also built into the incentive programs for the subsidiary CEOs that they need to reach a good level of free cash flow compared to the results in order to get a bonus. It is also incentivized, of course, we track this very, very closely, and we work on that as well. The main focus right now is to make the companies profitable.
Yes. We will not over-leverage. We will acquire companies in a sustainable manner so that we can make more and more money over time. As Johan said, the biggest funding source we will have is that we're going to make that money operationally, internally. Matthias Reichert is wondering, can you please speak more about your operating model? What are the KPIs? When do you interfere with managers? How do you change your hands-off decentralized model going forward?
You turned quiet. Does that mean that I can answer this?
You can start.
I can try. Our model consists of around 30 subsidiaries run individually by CEOs. We have CEO coaches in the head office that are there to support them and also track their performance. If we see trends that are turning the wrong way, it is the responsibility for the CEO coaches to step in and start asking why. If they can't get a good answer, then we need to monitor it more closely and see what actions are taken. It is more of an action-based coaching when we see things are not going in the right direction. If the subsidiary CEO is not able to produce a great action plan, then we will help them to develop one of those and then make sure that they follow them. If that's not possible, of course, maybe that's the wrong person for the job.
That is a little bit on a very rough level on how we operate. In this case, we have not been good enough in that, and that has been addressed over the last year in our reports and in my letters. This is what we now have improved and that we are working much closer with these KPIs. We are monitoring these KPIs that are necessary for the individual subsidiaries to excel, and we are making sure that every action is taken within each subsidiary in order to get them back on track. Just to remind you that the majority of the companies are doing this exceptionally well and are performing exceptionally well. We have a few, too many, but still a few that need more attention from us. Us coming out of this will have built a much better base for us going forward as well.
I mean, this is a tough and sad lesson, but it's something that we will come out stronger from.
Yeah. The base model is that we want to be decentralized. That does not mean that we should be sloppy and not step in when it is needed. Exactly as Johan said, I mean, it is basically maybe a four-step process. Companies that are performing as they should, CEOs that are performing as they should, they have rather free reins to continue to do good things and just become a little bit better each year. That is category one. If that does not happen, we will ask the companies for a business plan or action plan of how to make things better and see if they deliver on it, if we like the action plan. If we do not think the action plan is good, we make the action plan for the CEOs and ensure that they will run with it. If they do not, we find someone that will do it for us.
It sounds harsh. I think that we've been a little bit too patient, to use a nice word, during 2024. As Johan wrote in the letter, I think we exchanged four CEOs in Q4 2024. I would be surprised if that journey has ended. Moving on to the next question. Martin, through email, has wondered, could you provide an update on the current acquisition pipeline? Which sectors or regions are prioritized for the next three years? I can take that.
That must be yours.
Region, we're focusing on basically two regions. Focus number one right now is the U.K. It has been good hunting ground for us. We've learned a lot, and we want to continue that momentum with activities that we are starting today, but also following up on activities that we've kept for years where we expect results to happen in the near term. The second priority is Sweden or Scandinavia. We have things that we're working on and where we believe we will be closing something also this year. Sector-wise, we are rather sector agnostic. We're looking for companies that are not as dependent on macro, and we're looking for companies that have uncorrelated risk with the rest of the companies so that we can build a more robust group because we never want to be in this current situation again.
We are not looking at one specific sector, but rather companies that are great in diverse industrial sectors. Galileo Investor through email is wondering, how can you escalate M&A? You said that you can increase the number of transactions with the current team. How many acquisitions can you do without hiring someone else? It's difficult to put a number, but I promised all-time high, so we are going to deliver on that. That is not because we are going to go out and buy companies starting from today, but it is a momentum that we have built up. I feel that we and I have learned a lot of the process during the process. Some things are easy to put on paper, some things are more of soft character. The results are going to show themselves this year. I guess that is with everything.
We have been not good enough in a lot of areas, but I really don't believe that we'll find someone that can outwork us. That is also a promise.
Maybe just to underline a little bit once more that, I mean, the philosophy regarding what we're looking for when it comes to acquisition and how rigorously we investigate both the company that we're about to acquire and the people working there, it's the same. It's just that we have changed the way we work a little bit and maybe not a little bit, but we've changed it in a way. It's been a process, and as Daniel said, we have a very good pipeline that has been worked on for quite some time.
Yeah. Yes. Another question from the same person. You have warned that you have to warn the CEOs to start push selling more. Why weren't they already doing that given that they have bonuses? Isn't it better if they have Teqnion shares? Have you changed many of them for those reasons? Do the current ones look better? There's a few questions in one.
Yeah. Unfortunately, the world is not always that simple that you just pay more and get a better result. It also comes down to personality and having the right person in the right place. We changed during the year when it comes to what type of people we hire. We focus much more on the business mindset of those individuals, and they should have a clear view on how to make money. Maybe we have not been as good as we wanted previously, but since last year, we have much higher focus on this. Maybe I did not answer the question, but let's move on.
Yeah. We got a live question from Prakal, who's wondering what was the total cash acquired from acquisitions this year and what was the total consideration paid relating to acquisitions from previous year and what was the total cash paid and total consideration for acquisitions in this year. We actually don't disclose more numbers when it comes to that than the disclosures that we have. We'll have an annual report coming up where there will be some more information about that.
I think it's scheduled for the 22nd of March.
Yeah. However, I guess what is interesting to know is that as a cohort or cohorts looking at the last four or five years, when looking at what we've actually paid, what we think we're going to pay in total and what we've actually gotten in cash flow from the companies, you know that we've been nagging about that we have a valuation model where we want to get our money back in roughly five years. So far for the total group, we've gotten our money back faster than the five years, not by a lot, but some. The valuation model on a total seems to be working. We're paying what we should for the group. Some of them, we've been a little bit lucky. The payback time has been much faster than the five years and for a couple, a bit slower.
As a group, it has been adhering to our investment philosophy of getting the money back in roughly five years. Martin is wondering, what is the expected timeline for the decline in companies' return to profitability?
It varies a lot, and unfortunately, it's impossible and wouldn't be honest of us to give a specific date or a timeline there. We're working as hard as we can. We see improvements since we've been doing it for a while. I am confident that we will get back on track. When that is, we will come back to that.
I just want to emphasize that even though it's difficult to know exactly the timing, we're doing everything that we can on an individual company basis in order to make that as fast as possible. In the event if we get into a situation where we feel it's not going fast enough or in the direction that we want to, I mean, 2025 is going to be a year where that company like that will not make it to 2026.
You're very harsh today.
I'm very harsh today. Okay. Lamar is wondering, I appreciate the transparency and high standards at Teqnion. While Teqnion's recent acquisition appeared to be aligning well with the company's vision and standards, some of the early acquisitions have struggled and weighed on overall performance. As you've mentioned, addressing these lagging subsidiaries is a key focus point. Has the management team ever considered divesting from companies that failed to meet expectations? If so, what would the actual factors be to take those actions?
I think we covered that topic already, so maybe we just move on.
We have a question from Georgi, who is wondering, what is the target ROE and ROIC expected in around five years? That's just a few questions. Maybe we can start with that one. We absolutely have our internal targets when it comes to ROE and ROIC. It is also kind of possible to back that number out by looking at our three financial targets. When we acquire a company, for example, we try to get our money back in roughly five years. Overall, we borrow half of the money and use half of our own cash. That gives you more or less that answer. When we look at capital allocation internally, the benchmark and the gold standard is, of course, that we know what we can do with the cash through acquisitions.
If a company wants to buy a new laser cutter or whatever, that is the benchmark that we are trying to adhere to as strongly as possible, which puts a floor on where we think that ROIC and ROE should be over time. Because we do not have that as a financial target, I do not think it is a good idea to talk about that number. What percentage of subsidiaries have little pricing power without fear of losing customers? How much of the business might have the structure to lose to remain part of the business with pricing power? I think it is a difficult question to answer. Not because I do not want to, but it is because the concept of pricing power, of course, is not binary. It is somehow a long scale. We have a few companies that have very little pricing power.
Especially if we talk about the house-building companies in a macro environment like this, where there is too much supply still and not enough demand, the pricing power is not existent. We just have to take whatever price there is in the market. You have the other extreme where we know and we have seen where companies can basically do almost what they want with price and nothing happens with demand because they're absolutely unique in their solution. I mean, not to make this answer very long, but when we look at companies that we acquire, I mean, pricing power is a key factor. It's difficult to, I mean, we can't aim that every company is in a situation where they can put whatever price.
We absolutely want to acquire companies where we believe that there is untapped pricing power and where we believe that they are able to sell more even through raising prices. I think the ones that are struggling right now are, I mean, pricing power is a rather good indicator of if the companies have a good competitive advantage or not. Maybe that gives some kind of clue of how to think about it. Another live question is, as permanent owners, you must think on the sustainability of the business models for the long term. How many of the subsidiaries might not be around in 20 years due to disruption, out of fashion, other reasons?
I wouldn't dare to answer it, but I can answer it in this way. When we look at potential acquisitions, we think decades ahead. We look for businesses that sell crucial components for society that we believe will be around for a long period of time. Yeah, I think I'll stop there.
Yeah. Martin is wondering or writing, I appreciate your responses. My main concern is not just the numbers, but the lack of transparency. The last Q&A gave no sign of the severity and no profit warning was issued. That makes it hard to trust forward-looking statement notes. Do you understand this concern and how do you plan to rebuild trust?
I think the only way to rebuild trust is to show results. I'm confident we're going to do that. I just think words are not necessary in this stage. It is just action and showing proof of what we've been addressing today.
Yes. We have financial targets that are on a five-year basis. We absolutely believe that we're going to meet those targets and exceed those targets. I mean, five years is in situations like this, on days like this, it feels like five years is forever. We're not hiding behind the fact that we're long-term. That is the financial targets that we have. If we get into a situation where we don't believe in them anymore, which we are not, in that case, we would issue a profit warning. Carl is wondering, thank you for the update. When do you think the extra focus on struggling one-third will start to show in improved numbers for these companies?
I think we covered that answer.
Yes. Louis Evans, with the weakening performance in 2024, are you experiencing increased tension between the parent organization and any subsidiaries? Has Teqnion become a less fun place to work over 2024?
What a question. Yeah, of course. There's more friction since we have been more actively out with the subsidiaries and putting demands on the people that have given the responsibility to run them well. If they are not run well, of course, there will be friction. That is not fun, but it's necessary and it's part of our job. We still are very proud of our group and our team and our culture. That is fun. It's fun because we're in this for the long run and we're going to succeed.
Yes. This is probably something I'm going to regret saying later, but I mean, for us working at Teqnion, of course, it's more fun when the results are better and better because we like winning. In a situation where it's down, we lose sleep. It's not as fun. It doesn't matter that we know it's going to be better. It is less fun. We also want people that feel the same in our subsidiaries. We want CEOs that feel the pain because their company is doing less good. We want CEOs that lose some sleep if they are performing bad. That's the only way of making companies better. Not having that ownership is not okay while sitting in a position like that.
I don't think you're going to regret saying that. Continue.
George is writing, I use ChatGPT, Notebook LM, and DeepSeek on a daily basis. I use output from each to feed the others to analyze documents with quality and very little time, Pareto philosophy. What is Teqnion thinking on AI's productivity gains tools to increase sales investment, just not lose market? It is a very broad question. Maybe we can start by answering that. We personally use that quite a lot and more and more. We try to figure out, I try to figure out new ways of using different types of AI to save time to get productivity gains in our daily lives. That absolutely has yielded a lot of results. I do not believe that I would be able to do the amount of work I am doing now without some of these tools, to be frank.
Not only on productivity, but obviously regarding the quality and the insights that I can get through the different AI tools. On a subsidiary level, it is very dependent on which company it is. I'm not saying that it's more difficult to implement in some, but it's more driven by who is the CEO and who's running in the company. Some people have the aptitude of learning these things and liking these things. For those, I do feel that we have some productivity gains. Just to give an example, when it comes to marketing and creating different types of ads and writings, of course, you can save loads of money and time through doing that.
We have other CEOs that are actually very, very good at what they're doing, B2B sales, keeping costs low, etc., but have very little interest and aptitude for, let's call it AI, but maybe the broader IT. In those cases, we don't push that. If it's working, if they're running the company well, we keep the decentralized model. Want to add something?
is a lot of words about that. Generally speaking, what we do within the subsidiary group is, of course, that we try to share good examples and learn from each other. This is also one of those topics that we see good results from someone using these tools, then others get interested and inspired and start using them as well. That is how we improve a lot of things within the group.
Yeah. Akash is saying, "Hi guys." Sorry, I'm sure you will get through this difficult period and come out stronger. Yes. Regarding the new credit facility, how is it better than what we had before?
How is it better?
Yeah.
It's more flexible. It's a little bit larger, and the interest rates are lower.
Yeah. Yeah. It's a good combination.
Yeah.
Maestro is wondering, how come everyone in management are not insynsregler PDMR inside r person?
It's because that our interpretation of that regulatory writing is that only people that can influence the long-term strategic decisions of the company should be a PDMR. In Teqnion, we have three people there today. It's me and Daniel. I'm the CEO, so I have the executive power to make all these decisions. In some cases, it can be Daniel when it comes to talking to you today, for example, or if I shouldn't be here, he would be sitting here talking by himself. He's in our information policy. He's responsible for taking that role when I'm not available. We added Jonathan Alexanders son around Christmas since he's also a part in the acquisition team. All three of us need to agree on an acquisition. He has a veto in those topics, which makes him a potential, not a potential.
He is also a PDMR in that sense that he can actually make a decision that would prevent an acquisition. Those are the rules regarding these issues. Maybe we can clear that up going forward on the web page and in the reports and just show that in a more clear way. I mean, we're an office with nine people. Not all of those nine people have the power to make strategic decisions within the group. That's why not all of them are on the PDMR list.
Yeah. I also just want to stress, this is not something that we have made up. This is consistent with FI Finansinspektionen or the Swedish SEC. It is the rules that we are following. Who from the acquisition team is based in the U.K.? Jorda is wondering. I think if you ask my partner, Linnea, she would say me. None of us are actually based in the U.K. I think Johan , even Patrick, who's not part of the acquisition team, we are in the U.K. every second week for a few days, give or take. I think that number is going to change in the U.K. direction. I think that was the answer.
Do we have some more on the old question list?
Yes. Mufasa is wondering, regarding the underperforming subsidiary CEOs, were they always below standard or did you only find out their lack of quality during this downturn?
When you have a strong headwind in the economy, of course, you will see what type of personalities function in those climates or not. I think there can be a really long answer to that question, and it's debatable, of course. You will see it's easier to see poor performance or the lack of the right personality when the times are rough.
Yeah. A follow-up question on that is, were the CEOs in the position before we acquired the companies or were they hired from the outside?
The new CEOs have replaced CEOs that were not in the companies when we acquired them.
Yeah.
Sorry for my English.
All right. Janne, email. Why return on investment capital is not part of the financial targets for Teqnion. Net debt divided by EBITDA, EBITDA percentage, EPS growth are all good metrics, but I feel a key component like ROIC is crucial as well as assessing if value is greater or not.
You covered that already, right?
Yeah. Could you please consider how to clearly communicate how Teqnion's ability to acquire new businesses has developed over the years? It was briefly mentioned in the Q4 report, but more focus would be appreciated if, as it's one of the key questions in the investment case for Teqnion.
I think, well. Before 2021, it was more or less me. After 2021, it's been me and Daniel together. The approach has been that he has been very, very proactive in contacting potential acquisitions, and then he dragged me along to sit down and meet the potential sellers. I've been very much involved just next to him. It's been good for him, and it's been good for me, and it's been good for the acquisitions. Of course, now, since we are all more confident with each other and with our abilities, it would be stupid to continue to allocate resources in that way. Now Daniel is doing more of that initial work when it comes to acquisitions by himself and just involves me later on in the process when we get to more like a face-to-face or a real-life meeting with the potential vendor.
It freed up time for me doing other things, and it freed up, and it's accelerated Daniel's acquisition work because he doesn't have to wait for my schedule to do all these things that he's doing.
Yeah. I think once again, going back to the question, how can you trust that? I think that this is our description, explanation of what has happened and where we are now, but results can speak stronger than words. Smith, email. If I invest a significant part of my savings in Teqnion today and lock it up for the next 20 years, I'm trying to get an idea of what I should expect when I turn 60 and open the locked drawer. Any color is appreciated.
My intention is that it will be better than our financial target.
Yeah. I think financially, that's the easy answer. I think to put some kind of color on that, I mean, you know how other serial acquirers that have succeeded over time and are more mature and how that looks. That is some kind of path that we're, of course, get inspiration from while not trying to do any copycatting. I do think when it comes to geography right now, we're basically in two geographies. In a few years, we might be in more, very strategically thought out to build a better, stronger, more robust group. It will be more of the same, but better. That's the intention. All right. We have more questions here on the live. Akash is wondering, how are subsidiary managers incentivized?
They have a bonus system, which is a percentage of the profit increase each year.
Yeah. I should maybe also add that we have changed the bonus structure a little bit in order to tighten the incentives a little bit. It is exactly as what Johan said, but there's also a change so that if the theoretical bonus was negative, i.e., the results are lower, that's a negative bonus that you will be carrying forward and netted against future plus bonuses. It is upside and downside.
You need to generate a good enough free cash flow in order to get the full bonus as well. It is also incentivized, as mentioned before.
Maybe one more change that we can add for flavor is that if you get a high bonus, you will be forced to use part of that to actually buy shares on the open market that you will need to keep to create even more incentive alignment. Speaking of that, Martin is wondering, Johan and Daniel, do you plan to buy more Teqnion shares to increase your skin in the game?
I don't know what to say about that, actually. I feel it's rough to say. I would love to. I would love to. I think I stopped there.
Yeah. Maybe the last question. From Frederick Lier Salvesen , you state that the relative outperformance of the new companies due to better acquisitions the last four years. How can you be sure that is the reason and not the weakness in Teqnion model becomes apparent after some years of ownership?
I think one way of looking at it is that if we look at the companies that we have in our company, and if we would divide that up into maybe four different cohorts, we've been around for, let's say, 18 years. If we make cohorts of four or five years, the strongest performances are, yes, it's the ones that we've acquired lately, the newest cohort, but that doesn't prove anything, as you're saying. Equally strong is actually also our first cohort. The companies that have been with us the longest, just absolute weakest cohorts are, I would say, number three and parts of number two. If the thesis that we destroy all companies over time, then cohort one and two would be much weaker, and that is not the case. A lot of those companies are actually at all-time highs.
I think that gives a little bit of feeling that we believe that we actually don't destroy companies over time, but we need to improve the ones that are struggling.
Maybe it's time for us to wrap things up, right?
Yes.
We're at 9:00 o'clock. Just to summarize a little bit how we started out today, we were presenting our three key areas, our acquisition engine. It's performing very well. Our acquisition team has been reorganized and made more efficient, which will lead to more and continuously better acquisitions. We expect an all-time high when it comes to acquisition this year. We come to our profitable core of the group. It's a diversified group of subsidiaries, and they continue to deliver solid results. We are confident in this part of the business and remain aware to ensure that it's continued strength. New acquisitions will fall into this category as we acquire them. We have the third section, the struggling subsidiaries, where we have already taken significant corrective actions and are committed to restoring profitability. If further measures are needed, we will take them.
We thank you very much for your participation here today and your engagement. Thank you for all the questions. We will, of course, continue to fight to get back on where we want to be. We are confident that we are going to succeed with that.
Thank you very much.