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Legendary Compounder: Thompson Newspapers

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Legendary Compounder: Thompson Newspapers

Atlasview Insights -- bite-sized weekly insights that are relevant to all business owners, dealmakers, and investors.

Atlasview Equity
May 31, 2023
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Legendary Compounder: Thompson Newspapers

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Happy Wednesday folks!

Welcome to Atlasview Insights! We are thrilled to have you join us for another edition packed with valuable content for small business owners, deal makers, and investors alike.

For those who may be unfamiliar with us, Atlasview Equity is a private equity firm specializing in software and tech-enabled businesses. To learn more about our experienced team and investment criteria, visit us here.

In this newsletter, we cover: 

  • A Breakdown of Thompson Newspapers

  • Atlasview’s Investment Criteria Breakdown

  • Our Favorite Reads

  • Insights From Our Team

If you enjoy what you read, please be sure to subscribe and share with your colleagues.

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Preferred Investment Criteria

We look for the following characteristics in our partner companies:

  • Industry: Software and tech-enabled businesses

  • Business Profile: Sticky B2B customer base

  • Size: Minimum $1m EBITDA or $5m ARR

  • Geography: The US & Canada preferred

Whether you’re a business owner interested in working with us, or an intermediary with a deal to share, always feel free to reach out and get in touch with us!


Legendary Compounder: Thompson Newspapers

Our team recently came across this substack article on Thompson Newspapers and it has to be one of the best articles/case studies we've read this year. So we wanted to share the key learnings with our subscribers.

Thomson Newspapers was a rollup of small/niche local newspaper businesses. Roy Thomson stumbled upon the opportunity in his 40s, after several failed businesses.

Roy discovered that these local newspapers were mini-monopolies, they had strong pricing power and low capex requirements - delivering incredible cash flow relative to invested capital. The TAM for each local newspaper was very limited, and there wasn't much interest (at first) in these businesses because they were so small, so Roy could acquire them cheaply. The idea was, he was going to continually reinvest the cash flow to acquire/aggregate many of them, and keep them all decentralized.

If this strategy sounds familiar, it's because it's near identical to Constellation Software. In fact, Mark Leonard has said that Roy Thomson was his inspiration and business hero.

Thomson Newspapers acquired around 170 newspaper businesses and became known as one of the greatest compounders of its time. They compounded earnings at 20% for 38 years (this is truly mind-blowing). It catapulted the Thomson family to become the wealthiest family in Canada (a title they still hold today).

However, competition to acquire these newspapers rose sharply, and as a result, they became more expensive to acquire. This inevitably put downward pressure on ROIC. In the end, the entire business was disrupted by Cable TV. Take a look at how ROIC tracked over time below, in comparison with other serial acquirers:

The author did an incredible job researching and putting together such an insightful article. The key takeaways section he included at the bottom of the article really nailed it. Let’s rehash some of them here:

  • Everything is cyclical, it's just some cycles are longer than others. But all business models have an expiry date. Be careful of extrapolating historically positive metrics far into the future.

  • "Growth" via price increases alone can be misleading for investors. It can mask a deteriorating industry, and make the product/service offering unattractive to customers compared to alternatives.

  • Everything is supply and demand. Attractive acquisition opportunities will spawn copycats (demand goes up, capital flows in). This will inevitably push purchase price up and ROIC down, reverting an attractive opportunity back to an average opportunity. Pay attention to capital flows!


If you’re an owner interested in working with Atlasview or an intermediary with a deal to share — feel free to reach out and contact us. We will respond within 24 hours, and we can have an offer on the table within 7 days.

We are happy to pay referral fees for any deal referred and successfully closed.

Get in Touch


Our Favorite Reads

OnlyCFO's Software World
Valuation Lessons From Zoom
*Disclaimer: This is not investment advice. The author may hold positions in securities discussed. This is a story of a stock that saw its revenue valuation multiple drop by 97% from the peak. No, I am not talking about one of Chamath’s SPACs….I am talking about Zoom…
Read more
6 months ago · 27 likes · 3 comments · OnlyCFO
Mostly metrics
How much is your CEO worth?
What does CEO equity look like by Revenue band? In startup land it’s a common misconception that CEOs hold the majority of the company’s equity. While this might be true early on (like heading into a pre-seed round early), a CEOs stake drops precipitously (spelling?) each time the company raises capital…
Read more
6 months ago · 23 likes · 1 comment · CJ Gustafson

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Atlasview Equity is a private equity firm specializing in software and tech-enabled businesses. We combine patient capital with proven operational strategies to deliver predictable results for our stakeholders.

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