Roper Technologies earns 28.4% operating margins — wider than almost any industrial company in our 14-market screen. Its ROIC is 6.2%. Logista, Spain’s tobacco distribution monopoly, earns 2.3% operating margins — thinnest of any Tier A company we screened. Its ROIC is 32.9%.

The gap between those two numbers tells you everything about serial acquirer ROIC analysis. ROIC is not a function of margins. It is a function of what you paid for the capital generating those margins — and that price is embedded in the goodwill account.

Part of our Global Serial Acquirer Scorecard

Most published serial acquirer analysis uses return on equity, return on tangible capital, or the “adjusted” ROIC that strips goodwill from the denominator. These metrics have a systematic bias: they make bad acquirers look good. Every acquisition premium disappears from the denominator. A company that paid 3x book value for a string of targets looks identical to one that built those businesses organically.

We put goodwill back in. Across 187 serial acquirers in 14 markets, the result is stark: 128 companies — 68% of the universe — earn below a 12% cost of equity. Forty-two earn below 5%. This is the actual state of serial acquisition as a value creation strategy.

Key Finding: 128 of 187 serial acquirers globally earn below 12% ROIC with goodwill in the denominator. Of 51 companies carrying goodwill above 40% of total assets, only 12 earn above cost of capital — a 76% failure rate. Two paths produce consistently high ROIC: avoid acquisition premiums entirely (Switzerland, 62% Tier A), or earn operating margins wide enough to absorb them (US, 22.4% average margins, 38% Tier A). Every other approach produces predominantly sub-12% returns.

Why Goodwill Belongs in the Denominator

ROIC = NOPAT / Invested Capital. Invested capital equals equity plus debt minus cash. In our calculation, goodwill stays in.

Goodwill represents the premium an acquirer pays above a target’s book value. If a company buys a business for $100M that carries $40M in net assets, it records $60M in goodwill. That $60M is real capital deployed by shareholders — it represents the hope that the acquired earnings are worth the premium paid. Remove it from the denominator and you remove the evidence of that bet.

Consider the arithmetic. A serial acquirer generates $20M in NOPAT on $100M of tangible capital — 20% return on tangible capital. It paid $250M to acquire that capital, leaving $150M in goodwill. With goodwill in the denominator, ROIC is 8%. The 20% figure is true. The 8% figure is what shareholders earned.

The gap between these two numbers is not an accounting artifact. It is the acquisition multiple the company paid, expressed as a return drag. Companies that overpay for acquisitions will always show ROIC with goodwill far below ROIC on tangible capital. The gap is the scorecard.

Mauboussin & Callahan (2023) validated ROIC as the metric most correlated with value creation: their “dollar bill test” shows r=0.58 between ROIC-WACC spread and enterprise value per dollar of invested capital (r=0.78 when combined with growth). Among the Russell 3000, traditional ROIC averaged 9.5% — below what most serial acquirer pitch decks claim as targets. Our 14-market screen finds 128 of 187 companies below 12%, consistent with the research finding that the median public company barely covers its cost of capital.

The Distribution: 187 Companies, Four Tiers

Sixty-eight percent of serial acquirers earn below a 12% cost of equity. The 12% threshold is conservative — most serial acquirers carry higher equity risk than the broad market, implying a true cost of capital above 10%. The actual value destruction rate is higher than the headline 68% suggests.

The Tier B band contains 19 companies. These are not safe. Mauboussin & Callahan (2023) document that among companies transitioning from the top ROIC quintile to the bottom, 3-year compound annual total shareholder returns were -11%. A company at 10-11% ROIC that makes one acquisition at a rich multiple crosses below cost of capital and enters the bottom quintile. Fifteen percent of top-quintile companies make that transition within three years. Tier B is where the trajectories diverge.

Market Distributions: What the Tier A Rate Reveals

*Japan adjusted for genuine acquirers (GW/TA > 3%): 4 of 11, or 36%.

Switzerland’s 62% Tier A rate is the result of low GW/TA (17% average), not exceptional margins (15.5% is strong but not extreme). Eight of thirteen Swiss companies earn above cost of capital — four of them carrying zero goodwill. Switzerland proves that the path to Tier A runs through acquisition discipline as much as through margins.

The US (38% Tier A) runs the opposite model: 43% average GW/TA — highest of any market — but 22.4% average operating margins that absorb the burden. No US company earns below 5% ROIC. United States demonstrates that wide enough margins can overcome almost any goodwill load.

Sweden demonstrates what happens when neither condition holds: 34% average GW/TA combined with 8.8% average operating margins. Nine companies earn below 5% ROIC. The model that produces the most serial acquirers also produces the most value destroyers.

Two Paths to High ROIC

Mauboussin & Callahan (2023) decompose ROIC into NOPAT margin and invested capital turnover. Among companies sustaining top-quintile ROIC for 10+ consecutive years, average NOPAT margins ran 2.7x the universe average; invested capital turnover ran only 1.5x. Differentiation through margins, not capital efficiency through asset turns, is the primary driver of sustained high ROIC.

Our 14-market data both confirms and complicates this finding.

Path 1: High margins absorb goodwill.

Every market with a Tier A rate above 30% either has high margins or low goodwill. The US exemplifies the margin path. Illinois Tool Works earned 26.8% operating margins and 30.8% ROIC with 32% GW/TA — by stopping acquisitions in 2012 and letting organic profitability grind the GW/TA ratio stable while margins expanded. Rollins earns 23.9% ROIC with 41% GW/TA — the highest goodwill load of any US Tier A name — because 19.4% pest control margins provide sufficient cushion. Wolters Kluwer (Netherlands) earns 19.7% ROIC with 50% GW/TA on 24.6% operating margins. The pattern is consistent: above 40% GW/TA, only companies with 17%+ operating margins survive as Tier A.

Path 2: Avoid acquisition premiums.

OEM International (Sweden) earns 26.4% ROIC with 8% GW/TA and 14.5% operating margins — margins that would produce sub-10% ROIC at 40% GW/TA. OEM barely acquires. Its returns are organic. Inficon (Switzerland) earns 29.8% ROIC with zero goodwill. Belimo earns 26.4% ROIC with zero goodwill. Nedap (Netherlands) earns 18.6% ROIC with zero goodwill. These are not serial acquirers in the traditional sense — they are compounders that happen to be listed alongside serial acquirers. Their presence in Tier A is not evidence that the serial acquisition model works. It is evidence that not acquiring often works better.

The paradox: Logista.

Logista (Spain) earns 32.9% ROIC on 2.3% operating margins — the thinnest margins of any Tier A company in the screen. Logista disproves the margin thesis as the only path. It generates enormous revenue relative to its asset base through asset-light tobacco and pharmaceutical distribution. Turnover compensates entirely for paper-thin margins. ROIC is a product of NOPAT margin times invested capital turnover — Logista runs extreme turnover on minimal goodwill (12% GW/TA). This is the exception that clarifies the rule: when turnover is high enough, margins can be thin. But Logista’s model is rare — only one other company in our screen (Spain’s Viscofan) shows similar turnover dynamics.

The Goodwill Cliff: Where ROIC Breaks

The most actionable finding in the entire 187-company dataset: above 40% GW/TA, 76% of serial acquirers earn below cost of capital.

The 136 companies below 40% GW/TA earn above cost of capital at a 35% rate. Cross the 40% threshold and the rate drops to 24% — and most of those 12 survivors carry structural moats or margins above 16%. Above 40%, Tier A survival requires elite margins or structural moats. The 12 survivors above 40% GW/TA are worth naming:

Ten of twelve survive through operating margins above 16%. The two exceptions are instructive: ISS (4.8% margins, 21.7% ROIC) earns through asset-light facility management post-restructuring — a capital structure anomaly, not a repeatable model. Enghouse Systems (18% margins, 12.1% ROIC) barely clears the threshold. High goodwill and low margins is a combination our data does not support as a viable path to sustained Tier A ROIC.

The failure cases are equally instructive. Roper Technologies: 28.4% margins, 62% GW/TA, 6.2% ROIC. When goodwill exceeds 60% of total assets, even exceptional margins cannot generate adequate returns at the total capital level. Vitec Software (Sweden): 20.9% margins, 50% GW/TA, 6.3% ROIC. Paying 3-4x revenue for vertical market software acquisitions rather than Constellation Software’s historical 0.7-1.5x produces the same operating business at one-third the return on capital.

ROIC Persistence: Trends Matter More Than Levels

Mauboussin & Callahan (2023) found 48% of top-quintile ROIC companies remain in the top quintile after three years — a meaningful persistence rate. But 15% of top-quintile companies fall to the bottom quintile within the same period. The direction of ROIC movement predicts total shareholder returns: companies moving from bottom to top quintile delivered 33% compound annual TSR over three years; those moving from top to bottom produced -11%.

Our data confirms this with specific cases where ROIC trend is more informative than ROIC level:

Illinois Tool Works (US): ROIC rose from 19.4% to 30.8% over 13 years as acquisition activity stopped. GW/TA held flat at 32%. The trend generated compounding TSR over a period when most serial acquirers saw ROIC compress.

DSV (Denmark): ROIC declined from 27% to 6.8% after the Schenker acquisition (EUR 14.3B). DSV has restored ROIC after two prior large deals (UTi, Panalpina). If the trend reverses, DSV at 6.8% ROIC is deeply mispriced. If it does not, the Schenker deal joins the list of one-deal destroyers. Level alone cannot distinguish the two outcomes — trend direction over the next four quarters will.

Demant (Denmark): Declined from 28% ROIC to 10% as hearing aid market competition intensified and goodwill accumulated to 43% of assets. This is the pattern Mauboussin identifies as regression toward the mean — sector dynamics (hearing aids are a duopoly under competitive pressure) eroding a formerly high-ROIC franchise. Sector matters: industrials with structural moats sustain ROIC longer than consumer-facing acquirers competing in dynamic markets.

Constellation Software (Canada): Declined from 25-27% ROIC (2013-2017) to 10.8% today — below our 12% cost of equity threshold. GW/TA is only 11%, the lowest of any major acquirer in any market. CSU is not overpaying per deal. The problem is arithmetic scale: deploying $3B+ annually into vertical market software acquisitions at disciplined multiples still generates only 10-11% returns when the total capital base reaches $18B. Even the best serial acquirer faces the law of large numbers. The ROIC decline from the top quintile is not a failure of discipline — it is a mathematical consequence of scale.

Mauboussin & Callahan (2023) document that ROIC autocorrelation varies by sector: consumer staples r=0.46 over five years (slow fade), energy r=0.15 (fast fade). Industrial serial acquirers sit between these extremes. Our data suggests the fade accelerates when GW/TA crosses 30%: companies like Halma (UK, declined from 19% to 11.3% as GW/TA rose to 39%), Judges Scientific (UK, from 24% to 6.8%), and IMCD (Netherlands, from 14% to 8.2%) all show ROIC declining at an accelerating rate as the goodwill base grows.

The Margin Paradox: When Wide Margins Aren’t Enough

The most counterintuitive finding in the dataset concerns the margin-ROIC disconnect. Several markets produce companies with high margins and low ROIC — because goodwill absorbs the margin surplus.

TransDigm is the instructive extreme. At 47.4% operating margins — the widest of any serial acquirer above 40% GW/TA in our screen — it still earns only 10.7% ROIC with goodwill included. Aerospace component monopolies produce exceptional margins. But TransDigm deploys those margins back into acquisitions at prices that absorb the excess. The goodwill accumulates (46% of assets), and the ROIC settles in the borderline range. TransDigm is not a bad business. It is a demonstration that even exceptional margins become ordinary ROIC when acquisition prices are high enough.

Roper Technologies takes this further. 28.4% margins, 6.2% ROIC, 62% GW/TA. At 62% goodwill intensity — the highest of any company with above-15% margins in our dataset — even Roper’s software margins cannot generate above-CoC returns. The denominator wins. This is the mathematical ceiling: above roughly 55% GW/TA, there is no margin level that reliably produces Tier A ROIC in our dataset except for structural monopolies with moats.

The lesson is not that margins are irrelevant. They are necessary but not sufficient. The screen for serial acquirer quality runs:

1. ROIC with goodwill > 12%
2. GW/TA < 40% (or operating margins > 17% if above 40%)
3. ROIC trend stable or improving

Margins inform step 2. They do not replace step 1.

Using ROIC Analysis as a Screening Tool

The 187-company dataset yields a practical screening sequence for evaluating serial acquirers.

Step 1: Check GW/TA first.

Companies above 40% GW/TA have a 76% probability of earning below 12% ROIC. The screen starts here because it eliminates three-quarters of the failures before any detailed analysis. Companies below 40% GW/TA earn above cost of capital at a 35% rate — eleven percentage points better than the high-goodwill group. Discipline on acquisition price is the single most predictive variable.

Step 2: Verify ROIC with goodwill included.

Any ROIC figure that excludes goodwill from the denominator is measuring the wrong thing for serial acquirers. This disqualifies most broker research, most investor presentations, and most published rankings of “best capital allocators.” Adjust manually when necessary: add back goodwill to the denominator and recalculate. Companies that look compelling on return on tangible capital frequently look ordinary on ROIC.

Step 3: Decompose ROIC into margin and turnover.

ROIC = NOPAT margin × invested capital turnover. Companies in the same ROIC tier may be using opposite strategies. A 15% ROIC achieved on 3% margins (Logista-style turnover) is more fragile to margin compression than 15% ROIC on 20% margins (Geberit-style). Understanding which lever drives ROIC indicates how durable it is.

Step 4: Track ROIC trend, not level.

A declining 16% ROIC (like Momentum Group, Sweden, declining from 32% to 14.6%) is more concerning than a rising 10% ROIC (like Arcadis, Netherlands, recovering from 1% to 11%). The Mauboussin research shows ROIC trajectory is more predictive of future shareholder returns than level. Monitor annual ROIC against the GW/TA trajectory: if both are moving together (GW/TA rising, ROIC declining), the acquisition model is compounding the problem.

Step 5: Apply the 12% filter non-negotiably.

No serial acquirer earning below 12% ROIC with goodwill in the denominator deserves a premium multiple. A company earning 9% ROIC might generate operating leverage or a one-time ROIC spike, but the base-rate expectation from 14 markets and 187 companies is: sub-12% ROIC serial acquirers produce negative real returns for shareholders. The data from Mauboussin & Callahan (2023) and our cross-market screen agree: top-quintile to bottom-quintile transitions produce -11% compound annual TSR over three years.

Methodology

We screened 187 serial acquirers across 14 markets. Data covers the latest fiscal year available as of February 2026.

ROIC = Net operating profit after tax / invested capital (equity + debt − cash), with goodwill included in all cases. Source: QuickFS (13 markets), Stock Analysis (Japan). GW/TA = goodwill / total assets (most recent quarter). Where disclosed, we also report (GW+Int)/TA, which includes identifiable intangible assets allocated in purchase price accounting. For software serial acquirers, the combined ratio is materially higher than GW/TA alone — Vitec Software shows 50% GW/TA but 88% (GW+Int)/TA.

Tier thresholds: A (> 12%), B (10–12%), C (5–10%), D (< 5%). The 12% threshold is our proxy for cost of equity — conservative for most serial acquirers, which carry above-market equity risk.

Japan operates under dual reporting: JGAAP amortizes goodwill (max 20 years); IFRS uses impairment-only. Japan’s 11.5% average GW/TA is partly an accounting artifact, not purely a reflection of acquisition discipline.

For a complete methodology and cross-market rankings, see our Global Serial Acquirer Scorecard. For guidance on applying this analysis to individual companies, see How to Analyze a Serial Acquirer. For the specific mechanics of goodwill accumulation and its effects, see The Goodwill Cliff. For CSU’s position relative to global peers, see Constellation Software vs the World. For the full Tier A ranking, see Best Serial Acquirers 2026. For the low-goodwill compounding model, see Compounding Machines.