Don't be fooled

RXP make acquisitions when they are in trouble. I have heard they overpay on acquisitions because they keep the vendors in the business and pay them nothing or very minimal out of the operating results for a couple of years. They get remunerated through an increased acquisition payment. For RXP this increases EBITDA and operating cash, as the vendor annual salary is effectively in the intangibles. For the vendor this is tax effective. There is no way to pick this up in the accounts because it just so happens with every acquisition they say they can't tell you what they contributed because they are now consolidated in the business....this is a very old trick!

So whilst I think RXP is a solid business, when I see an aquisition, I know the underlying business must be coming off.