Roll-Up Strategies?

April 26, 2020

by a searcher from Harvard University - Harvard Business School in Cambridge, MA, USA

Anyone with roll-up strategy experience open to talking?

I'm a first-year MBA interested in both traditional search and roll-ups (especially healthcare, e-commerce and franchises). However, I don't come from a finance/private equity background. What do you think is the failure rate of roll=up vs traditional? What skills are required to have credibility with roll-up LPs? What does it take to truly succeed?

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Reply by a searcher
from University of Pennsylvania in Chicago, IL, USA

I think growth via acquisition should be in every CEO's playbook. And I would argue that almost all spectacular growth in established industries occurs via acquisition. Consolidation for the purpose of multiple expansion and future sale - I think is more difficult and riskier - mainly because I think it can affect one's mentality (building to sell vs. building to own forever/very long time). However, acquisition for the purpose of building a better business along all dimensions will always be valuable and is an enduring strategy. There are too many stories of success to ignore. Here is an example of a bigger company, but I think the lessons are the same: https://chiefexecutive.net/inside-kevin-lobos-growth-engine/

Reply by a searcher
from University of Vermont in New York, NY, USA

Nathaniel--I have roll-up experience and I'd be glad to share it with you. The success or failure of a roll-up strategy can be summarized in a few ideas: Are the targets available at a meaningful price discount to the ultimate platform; What will it take to realize--actually realize--cost synergies, among others; How necessary is integration and how confident are you in your team, whatever team it is, to execute the integration; What is your ability to raise capital to continue to fund acquisitions, The answer to the last point, of course, is highly dependent upon the answers to the other points. BTW, "roll-up" has become somewhat of a dirty word, so perhaps focus on "consolidation play."

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