Target companies rarely have the personnel and expertise to conduct a roll up of other targets on your list. So don’t expect to buy your first company and use that management to run the next twenty companies you acquire. In fact, the integration of the operations of the target companies needs to be conducted by […]
Creating Value: Successful Australian Roll-Ups
“Despite the past struggles of roll-ups, more are now appearing on the ASX. These roll-ups are swallowing boutique rivals in law, insurance broking, travel, petcare and IVF industries. Investors have bid up the share prices of these roll-ups for there is every reason to expect success for these companies, whose strategy is grounded in exploiting economies of scale….
Plenty of roll-ups have flourished in the past, of course. Ramsay Health Care in its early days was a roll-up, as were many property trusts such as Centro Properties. Some of the newer roll-ups have better business models than others; the quality of management varies; some may struggle to gather the savings need to justify their scale while other companies may attempt the strategy in industries not ripe for such expansion plans. It’s just that these days roll-ups have more chance of success thanks to two long-term trends that are altering the dynamics of cottage industries in their favour.”
Roll ups are a valid way of creating shareholder value. They proceed on the basis that the main company can acquire a number of smaller players in a fragmented industry and achieve cost savings as well as a better value proposition in a relatively short time span. A roll up strategy must be planned out […]