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WATCH NOW: The 'forever' investor: Markel Ventures has added 20-plus companies to its roster in the past 15 years

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Markel’s Tom Gayner explains the company’s acquisition philosophy

If you’re eating a hamburger from a fast-food restaurant, there’s a good chance that Richmond-based AMF Bakery Systems had a hand in making the bun.

The company, which has a factory on Laburnum Avenue in Richmond, is part of a larger group of businesses called Markel Food Group that operates 10 factories around the world. Those factories manufacture equipment that AMF’s customers — industrial bakeries — use to produce billions of buns, crackers, cookies, pretzels and pizzas every year.

Ken Newsome, the CEO of Markel Food Group, said the company is about 15 times the size it was when he acquired it along with other local investors in 1997. The business has grown from about 125 employees to more than 800 around the world, including about 160 in the Richmond area.

Much of that growth has come since 2005, when AMF Bakery Systems was acquired by Henrico County-based Markel Corp., a Fortune 500 company whose primary and largest business is specialty insurance.

“Without the capital of Markel and the support of Markel, none of this would have happened,” Newsome said of the growth of Markel Food Group, which includes AMF Bakery Systems.

“We have made several substantial acquisitions along the way, and it was all their capital,” he said. “The Markel folks have been unbelievable partners. They are my counselors and advisers and coaches and friends.”


AMF Bakery Systems was the first acquisition for Markel Ventures, an investment arm of Markel Corp. that buys companies outside of the insurance business.

A little more than 15 years after Markel Ventures was created, the portfolio of businesses has grown to include 21 companies in industries as diverse as fire suppression systems, concierge medicine, construction, technology consulting, decorative plants and fashion leather handbags.

Ten of the Markel Ventures companies are based in the Richmond region.

Thomas S. Gayner, Markel Corp.’s co-CEO and the creator of the Markel Ventures business unit, said it wasn’t part of the strategy to invest specifically in Richmond-area companies.

Markel Ventures has made acquisitions worldwide, but local companies are a significant part of the portfolio because many of its acquisitions have resulted from relationships that took years to develop.

For instance, with the first deal to buy AMF Bakery Systems, Gayner said he had known Newsome professionally and personally for some time.

“I trusted him and liked him, and the company [AMF] is in an industry that seemed like it was not going to be technologically disrupted,” Gayner said. “Bread has been around for thousands of years.”

“We were able to strike a deal to purchase AMF and keep it headquartered here in Richmond, and it just grew from that,” Gayner said.

“Once we did that deal, we gained credibility” as an option for other companies looking for a buyer, he said. “The phone started ringing.”

Since then, roughly half of the deals struck by Markel Ventures have come through a more traditional buyout structure involving investment bankers who reach out to Markel about potential acquisitions, Gayner said.

“But literally half of our deals have come about through person-to-person contact, with no intermediaries,” he said.


Markel Ventures had about $60 million in revenue in its first year of operations following the initial deal to buy AMF Bakery Systems.

This year, Markel Corp. reported to its shareholders that in 2020, the companies in the Markel Ventures group generated $2.8 billion in revenue and $254 million in operating income.

That amount of revenue actually exceeds the revenue of the $2.2 billion that Markel Corp. reported for its entire business in 2005, the year Markel Ventures was created, said Michael Heaton, the president of Markel Ventures.

Of course, Markel Corp. has grown significantly as a company since then through its insurance business. Markel Corp. posted total revenue of more than $9.7 billion for 2020, including the contribution from Markel Ventures.

“The broader story here is that Markel has been building this incredible insurance business for decades,” Heaton said.

With Markel Ventures, “we were looking for opportunities to bring more companies into the family that were also great long-term businesses that shared our culture,” he said.

Markel Ventures, which has invested about $2.7 billion over 15 years to acquire the companies in the portfolio, doesn’t buy companies with an eye toward selling them later.

Heaton said the company considers its portfolio businesses as “permanent” additions that will contribute to Markel Corp. forever.


The revenue from Markel Ventures has been boosted by some significant acquisitions in recent years.

Those have included a 2019 acquisition of VSC Fire & Security, a Hanover County-based company that installs and maintains fire suppression and security systems with employees in eight states.

In late 2015, Markel Ventures bought a majority ownership stake in CapTech, a Henrico-based technology consulting firm founded in 1997.

Sandy Williamson, CapTech’s chairman and co-founder, said Markel Ventures has given the company resources and flexibility to continue to grow its business, especially in the high-demand field of data analysis and management.

“We had private-equity people looking to invest in us and venture capital people, but that would have required us to give up total control,” Williamson said. “We thought we could continue to grow the business, but we just needed a little more support and we wanted to take some equity off the table. [Markel] offered the best solution out there.”

In 2020, Markel Ventures made what Gayner described as its largest acquisition ever by buying Lansing Building Products, a family-run building products company founded in 1955 and based in Henrico.

The acquisition came as Lansing, which employs more than 800 people at offices around the country, was looking to expand its footprint in the Northeast through an acquisition of Massachusetts-based Harvey Building Products, a deal that has almost doubled Lansing’s annual revenue to $1 billion.

“We knew that for Lansing, the right thing to do would be to have a financial partner in an acquisition as transformational as this one was for us,” said Hunter Lansing, the company’s CEO and the grandson of the founder.

Lansing worked with an investment banking firm and considered a private-equity buyout, “but after numerous calls and meetings, we didn’t think it was the right fit for our company,” he said.

“We have known Markel for a long time and so we met with them,” Lansing said, adding that he was impressed with Markel’s attitude that its acquisitions are meant to be “forever.”

“I could tell immediately that they understood how important our culture is to us and how our people [Lansing employees] are the center of that culture, and taking care of our people from a long-term perspective is the most important thing we do.”


The vision behind Markel Ventures was largely based on an investment model pioneered by Berkshire Hathaway Inc., the Omaha, Neb.-based multibillion-dollar conglomerate led by legendary investor Warren Buffett.

Markel Ventures looks for businesses with a good return on capital without too much debt, and especially for a management team “with talent and integrity,” Gayner said.

It also looks for companies that have carved out a sizable share in niche industries. “I would say we tend to invest in large companies in small industries,” he said.

The company usually either buys 100% of a business or an 80% stake with a plan to transition into full ownership, Gayner said. Beyond that, Markel Ventures takes a hands-off approach to management.

“I want people who are very good at what they do and are trustworthy so we can grant them autonomy,” Gayner said. “If we have to get involved in the daily running of the business, then it means that something has gone wrong.”

Heaton, the president of Markel Ventures, jokes that his management team has learned to be “experts in the art of doing nothing” — at least when it comes to not interfering with the management of the portfolio companies.

“Human nature is to want to be involved,” he said. “No matter which seat we have in the car, we want to have a hand on the steering wheel.”

“But our number one effort is building trust with the people who run the businesses so they can do so with a high degree of independence,” Heaton said.


The leaders of Markel Ventures companies say they deeply appreciate the hands-off approach.

“They don’t run us, and they don’t try to run us,” said Michael F. Meehan, the president and CEO of VSC Fire & Security, the Hanover-based company that Markel Ventures acquired in 2019.

“They really look for quality companies that are well-managed and they let them do their thing and give them the tools to help them grow and flourish,” Meehan said.

The company was founded in 1958 as Virginia Sprinkler Co. and was initially managed from the family home of co-founder Roland C. Giles.

The company, which changed its name to VSC Fire & Security in 2009, has since grown to employ 1,200 people at 23 offices in eight states from Maryland to Arkansas. About 35 people work in the headquarters in Hanover, with an additional 120 working in the Richmond area and about 500 employees at locations around Virginia.

VSC installs and maintains fire suppression systems such as sprinklers, along with fire and security alarms for various building projects.

Asked why Markel Ventures saw VSC as a good investment, Gayner smiled and pointed to the sprinkler system in his own office at Markel’s headquarters in the Innsbrook Corporate Center.

“I don’t think there is any room in any commercial space you are going to be in that doesn’t have something like that,” Gayner said. “It is an absolutely necessary service.”

VSC has grown over the years as building codes have evolved and fire suppression systems have become much more common in commercial buildings and multifamily residences such as apartments, Meehan said. The company does both small and large projects.

For instance, it recently installed fire suppression systems in Dominion Energy Inc.’s downtown office tower, Meehan said.

Unlike some investment businesses, Markel Ventures also focuses more on long-term growth rather than immediate, quarterly returns, Heaton said.

“What we have done today matters, what we did in the last quarter matters, and what we did in the last year matters, but at the end of the day, it will be what we do over 5- to 15-year periods that will determine our ultimate success,” Heaton said.

Newsome with AMF Bakery Systems said he decided to go with Markel as a buyer because of the company’s “now and forever” mindset, he said. That mindset focuses on what can be done today to ensure that a business will be around and thriving in 20 years or more.

Newsome said that stands in sharp contrast to many other investment entities, such as some private-equity firms, that tend to think more in two-, three- or five-year windows before setting “arbitrary dates” to sell a business at a profit.

“I can’t imagine a better partner [than Markel] for an owner and manager who cares as much about the next 20 years as they did the last 20 years,” he said.

Markel allows “you to run your business and do it with a financial stability that is unheard of.”


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