PE Playbook for a Rollup
August 30, 2024
by a searcher from Boston College - Wallace E. Carroll School of Management in Newport, RI, USA
Over the past few years, I've been able to successfully string together a few mom and pop deals in a very niche space. These have been very straight-forward acquisition structures, with very minimal seller involvement post-transaction outside of the first one.
The pipeline has effectively dried up at this point and in order to continue growing/executing deals, I need to shift strategies a bit when approaching sellers. What are some market/standard offers that are used to attract sellers that are younger/on the offense and sell them on the dream of being part of a larger business? The idea being that for many of these Sellers, they'd join the team as senior management as opposed to selling and riding off into the sunset.
from Carnegie Mellon University in Seattle, WA, USA
Show the seller how you'll grow the business. From there, seller financing and traditional debt is a no-brainer for a healthy business.
My takeaway from recent discussions is that most capital allocators are risk-off for roll-ups (for now) unless you have a super buttoned-up process and a strong reputation. Your value add is the growth strategy, not access to capital. By bringing equity capital into the deal you may end up with more headaches and horrible economics for you upon exit.
from University of Auckland in Auckland, New Zealand