As a diversified financial holding company, Markel Corporation (NYSE:MKL) builds its business through a combination of its profitable insurance operations, its market-beating investment portfolio, and its varied group of owned and acquired companies operating under the Markel Ventures moniker.
Earlier this week, that latter group grew just a little larger when Markel announced a definitive agreement to acquire a majority stake in fashion leather handbag specialist Brahmin.
The makings of a Markel Ventures company
The terms of the deal weren't disclosed, so we're certainly not talking about an industry giant like Michael Kors or Tapestry subsidiary Coach. But Markel does note that Brahmin boasts "significant wholesale distribution and a rapidly growing direct-to-consumer business."
And if one thing is sure, it's that Markel believes the Brahmin brand is built to last. After all, Markel Ventures finances its purchases with "permanent capital using little or no debt," and insists its goals are to "buy, build, and hold."
What's more, in seeking prospective acquisition candidates, Markel Ventures only gives serious consideration to companies that:
- Are profitable with good returns on capital
- Have talented management teams and a culture of integrity
- Demonstrate capital discipline with opportunities for reinvestment
- Have fair prices
Prior to this purchase, that checklist led Markel to more than a dozen various businesses ranging from auto-transport trailer maker Cottrell to ornamental plant leader Costa Farms, portable dredge manufacturer Ellicott Dredges, several baking equipment businesses, and even a residential homebuilder.
Indeed, with regard to Brahmin specifically, Markel co-CEO Tom Gayner added:
The Martins [Bill and Joan], Susan [Thacker], and the entire Brahmin team have built a phenomenal business. We were fortunate to be introduced to the Martins and the Brahmin brand by a member of our own family -- immediately, we recognized the shared values of our two organizations. Together, we look forward to the perpetuation of the Brahmin story ... and of course, we can't wait to purchase a few handbags from their beautiful new fall line.
The bigger picture
It's unclear exactly how much revenue Brahmin typically generates or how profitable the business is. So for perspective, last quarter Markel Ventures' operating revenue soared nearly 85% year over year -- an unusual growth rate driven primarily by the Costa Farms acquisition in late 2017 -- to just under $580 million, or roughly 29% of its total top line.
Assuming the purchase closes as expected by the end of 2018, then it should be interesting to see exactly how much Markel's majority stake in Brahmin moves the needle in the coming quarters. In any case, as yet another piece in Markel's long-term efforts to compound its market-beating returns, it's safe to say that Brahmin isn't going anywhere anytime soon.