Disclaimer: Unless noted otherwise, views and analysis expressed here are the author's own and based on public sources. The article is intended for informational and entertainment purposes only. This is not financial advice. Please consult a professional for investment decisions.

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Judges Scientific (JDG) is a UK-listed acquirer of small, niche scientific instrument businesses. Think hardware for electrophysiology researchers (Scientifica) or geologists (Geotek). Since 2005, it has made 25 acquisitions, growing revenues by a factor of 70 (from £2.2M to £146M) and operating cash flow 100x (from £300K to £30M). 

Let us repeat: 100x in 20 years. A CAGR of 26%!   

Such breakneck growth was not lost on fund managers. Judges relisted in 2005 at £1/share equating to £3M market cap ($6M at the time). By spring 2024 it was valued at $1B+. That proved the high-water mark: the shares have since lost more than 60%. 

There’s no shortage of opinions on what went wrong, for JDG enjoys an unusually broad following (for a company of its size) by prominent value investors / bloggers like Matthias Riechert from P&R, Chris Waller, Andy from Biz Almanac and Compounding Quality. A consensus view is that JDG has succumbed to a quadfecta of:

As we have witnessed with Swedish HoldCos (read here and here), even the savviest acquirers are prone to missteps. No business model is completely insulated from economic cycles. What’s different about Judges is the stark reversal in fortunes. For the next couple of years, brokers expect its free cash flow (before M&A) to fall off the cliff - back to pre-Covid levels:

As this wasn't bad enough, consider the fact that JDG’s Invested Capital has more than quadrupled since Covid, driven in large part by the Geotek acquisition in 2022:

The upshot: return on capital got crushed.

Clearly, these developments caught the market by surprise, hence the severe reaction. As one analyst put it, “the valuation had simply run too hot. After years of near-flawless execution, the stock was priced for perfection, and that left no room for disappointment”.

To be clear, we’re not challenging JDG’s business model. Even today, it remains a standout compounder with a share price that’s up more than 40x since 2005 (£1 -> £42). Including dividends, Total Shareholder Return stands at c.50x over a 21-year period.  

Instead, we attempted to answer a simple question: “What actually happened at the portfolio level?”. To do that, we dissected JDG’s 12 larger acquisitions to see how individual businesses have performed over a decade. We also zoomed in on Geotek, JDG’s largest, and most controversial acquisition. We conclude by squeezing a few drops of wisdom for the HoldCo crowd from this case study.

As usual, remember that none of this is investment advice!

Read on to learn about:

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David Cicurel founded Judges Capital in 2002 after a successful career as a turnaround expert. He was 53 at the time. A reminder that it’s never too late to start a HoldCo!

Judges’ stated strategy was “to invest in a small number of quoted companies where the Directors believe an opportunity exists to increase shareholder value” (source: IPO prospectus). Unfortunately, right after the 2003 IPO (which raised £2M at 95p - David put in a quarter of that), the FTSE SmallCap Index surged, eroding the public / private arbitrage opportunity. 

Undeterred, David pivoted to a new idea: aggregating British instrument makers, a sector which he estimated to be worth £5B - with 2,000 active companies. In 2005, the newly rebranded Judges Scientific raised another £1.3M at 100p (£1) to fund the very first acquisition: Fire Testing Technology or FTT (source: 2025 admission document). 

FTT designs and manufactures instruments used by companies to confirm fire- and heat-resistant properties of their products. A £3M revenue business running on 20%+ operating margins. Price paid? 4x EBITA upfront plus earnout.  

Today, JDG’s portfolio overwhelmingly consists of businesses that are IP-rich and excel at selling expensive equipment destined to long-term customers in academia and industry:

More acquisitions followed, all following the same 3-step playbook: 

Step one: finding small but highly profitable instrument manufacturing companies that dominate their respective markets. Acquiring them for 4-6x EBITA from retiring owners. David’s discipline around purchase price has enabled the company to maintain ROCE above 20% for the most part: 

Step two: completing a smooth handover from retiring owner to new, autonomous management. To quote from the 2023 annual report “We trust subsidiary management teams with the day-to-day running of their businesses... management teams are given responsibility for their own destinies, as well as an environment in which they can thrive”. 

Step three - the post-acquisition playbook. Three priorities here: robust reporting, leadership transition, and driving improvements in pricing and R&D - while eschewing integration or pursuit of synergies. And certainly avoiding turnaround situations. As David explained, “A lot of buy and builds-up are based on [...] installing people trying to improve the business. That is something that I didn’t like because I spent a lot of my life as a company doctor sorting out these situations”.

Buying dependable businesses cheaply: what could possibly go wrong with this strategy? Alas, by the early 2020s, JDG’s operations were starting to throw off too much cash flow relative to the opportunity set: 

What to do with all the money? David’s averse to share buybacks. As he put it, “we realized we couldn’t reinvest all our capital into small acquisitions alone. That led us to consider larger deals from time to time, which usually come at higher multiples”. 

And in 2022, such a deal came along.  

For a company accustomed to closing one acquisition per year, almost always under $10M, Geotek was a big bite. Overnight, the deal lifted group operating profits by 50%, from £20M to £30M! 

What is Geotek? Founded in 1989 and based in Daventry, in the heart of Midlands, it designs and manufactures tools for non-destructive analysis of geological core samples. Geotek’s products and services are highly sought after by researchers and resource extraction companies. Juicy profit margins attest to the specialism. In 2022, Geotek reported pro forma EBIT of £11M on £20M of sales: a margin of 55%!

The acquisition set JDG back by £80M ($100M), plus a $1M finder’s fee for Charles Holroyd, JDG’s Non-Executive Board Director who knew the Geotek Chairman Peter Schultheiss from before, and who made the introduction (source).

Geotek derives a significant portion of revenue - 30-40% on a through-cycle basis - from renting equipment to coring expeditions. These are very lucrative pursuits that nevertheless cannot be reliably forecast. In reality, post-acquisition, expeditions took place in 2022, 2023, and 2025 - but not in 2024 or 2026. Geotek’s medium-term prospects in the US, its largest market, are clouded by the One Big Beautiful Bill - which severely curtailed federal funding of scientific research.

Even Geotek’s founder wasn't convinced about the expedition bonanza. David again: “The company had challenges during COVID but rebounded strongly post-acquisition, earning £11M and qualifying for an earnout. [In 2022, the previous owner] expected to return to a profit level of around £6M”. 

Having experienced a failed sale process pre-Covid, Peter Schultheiss (who turned 71 in 2022) wanted out - and quickly.

JDG’s solution was to split purchase consideration in two. £45M was paid at closing, equating to 7x of historic EBIT. The highest multiple in JDG’s history, but far from outlandish by HoldCo standards. The earnout made up the difference. Weirdly, the entire £35M was based on a single year’s performance… these turned out to be peak earnings:        

Why on earth would a savvy acquirer like Judges bet the farm on a business as volatile as Geotek? Because they had done this before. 

During research, we stumbled upon a blog post claiming that “two of Judges’ biggest acquisitions [pre-Geotek] were Armfield (bought in January 2015 for £8M) and Scientifica (purchased in 2013 for £12M). Both deals have been flops, with revenues and profits declining significantly”.