Over the past three decades plus of deal-making, we have been involved and assisted clients with most every type of business transaction. Acquisitions have been most numerous, and some of the most successful of the acquisitions have been rollups.
A rollup isn’t for everyone. A rollup:
- requires a fragmented market segment
- requires sufficient financial resources and strength on the part of the acquirer to make multiple acquisitions
- tends to work out best where the acquirer has sufficient management strength to manage the multiple acquisitions and the related integration
- requires a relatively strong culture for support
Where these ingredients are all present, there is a very strong case to be made for a rollup.
A rollup (also referred to as a consolidation) is a term used to describe a company that is built primarily through the acquisition of smaller companies with common services or products. Usually, roll ups are conducted by financial buyers in a specific market that is fragmented and therefore can be consolidated through mergers.
The financial buyer will identify potential acquisition targets that can offer products or services within the fragmented market and usually acquire them through a platform company. The rollup then entails putting the various businesses together under a common brand, administrative structure, reporting systems, and sales and marketing, so the combined business is presented to the customer base as a single entity.
In the roll up, value is created by building a much larger, scalable entity and by establishing a common platform of systems and processes that allows for easy integration of each acquisition.
Particularly in markets that are fragmented, an acquirer should keep in mind the tremendous value that can be added / generated through a roll up.
Quote of the Week
From One Friend to Another I’ve learned the following:
- That the best classroom in the world is at the feet of an elderly person.
- That just one person saying to me, ‘You’ve made my day!’ makes my day.
- That everyone you meet deserves to be greeted with a smile.
- That opportunities are never lost; someone will take the ones you miss.
- That the easiest way for me to grow as a person is to surround myself with people smarter than I am.
~ Andy Rooney of the 60 Minutes TV show.