Red Flag Alert – ESAB's False Narrative
It's one thing for a company to aspire to be a compounder; it's another to claim it already is... when it isn't.
▶In keeping with a theme I’ve been hooked on lately… false narratives: Some companies really are compounders. It’s the ones that claim they are, but aren’t, that you should be concerned about.
And not just any old compounder, but a “premier…compounder.”
Welcome to the over-the-top promotional world of ESAB ESAB 0.00%↑, a rollup of welding equipment that was spun off a few years ago from Colfax Corp., which at the time of the ESAB spin rebranded itself as Enovis ENOV 0.00%↑.
Special thanks to Tenzing MEMO, Fiscal.ai, and Behind the Numbers, which were used as part of this research.
What makes ESAB seemingly so special is its DNA, in that Colfax was founded by the legendary Rales Brothers, Mitchell and Steven. They also founded Danaher DHR 0.00%↑… viewed by many as the gold standard for modern industrial compounders.
More than that, unlike Enovis, Mitchell stayed on as chairman of ESAB. He also owns a stake of more than 5% of its shares. Adding to their enthusiasm, both brothers helped fund the company’s recently announced $1.45 billion acquisition of Eddyfi Technologies, a leader in non-destructive testing, with the purchase of $125 million in convertible preferred shares.
With That As the Backdrop…
It’s no wonder investors have bought into ESAB’s “compounder” story…