And finally, on to RPM Global, which grew into our top 5 positions during the month. Our investment thesis has always centred on the software business. In February, RPM announced the sale of its lower-margin, and more-cyclical, Advisory division -- and for what we think is a heady multiple relative to the business quality. Pleasingly, this leaves us with a pure software business going forward. (Don’t worry, we won’t bore you with the attractiveness of capital light, sticky enterprise software revenue streams for long-term investors like us.)
We have long been fans of CEO Richard Matthews who has strong commercial acumen and an enviable track record of buying, integrating, and selling software companies. His earlier days at RPM were marked by dutiful cost management, followed by a period of acquisition of complimentary software code to build out the product suite. As that investment slowed, and the business steadily grew, the company’s (excess) cash balance swelled. Since mid-2022 (when equity markets were sagging) RPM has steadily bought back stock, having spent over $20 million to acquire 5.3% of shares outstanding at an average level 43% below the closing price at the time of writing. This kind of capital allocation is what we’ve come to expect from a founder-minded business leader like Richard.
While our investment thesis rests on the continuing steady growth of the software business, we are pleased that as investors we stand to receive a material, and very tax-efficient, return of capital from the Advisory sale proceeds in the coming months. Alongside this, there have been several M&A transactions in recent years that could spread to RPM Global.
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