In The Trenches

Why You May Want to Reconsider Your Industry Roll-up Strategy

May 9, 2024

Exploring the trend of industry roll-ups, challenges of fragmentation, post-acquisition integration, financing strategies, M&A growth considerations, and skeptical views on consolidation theses within the search fund ecosystem.

19:53

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Quick takeaways

Consolidation in industries can offer benefits like acquiring smaller companies at lower multiples and achieving economies of scale in larger entities.

Implementing consolidation strategies can be complex due to integration challenges, risks of M&A failures, and considerations on financing structures in search fund investments.

Deep dives

Acquisition Thesis in Fragmented Industries

Acquiring a single larger platform company followed by smaller bolt-on companies in fragmented industries can provide multiple benefits. Smaller companies in fragmented industries often trade at lower multiples, offering opportunities for arbitrage. Additionally, economies of scale in larger consolidated entities can lead to substantial economic advantages. This consolidation strategy has gained popularity in sectors like home services, with HVAC, landscaping, and plumbing, presenting consolidation opportunities.

Introduction

2min

Strategic Analysis of Industry Fragmentation and Execution Challenges in Roll-up Strategies

5min

Navigating Post-Acquisition Integration and Financing Strategies in Industry Roll-ups

5min

Strategic Considerations in M&A and Growth Strategies

3min

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* This episode is brought to you by ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Profit Line: The Outsourced Finance & Accounting Department for Small and Medium Sized Businesses⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠

* Though pursuing the consolidation of an industry is not necessarily a new thesis within the search fund ecosystem, I have observed that it has become increasingly popular over the past few years among prospective searchers. Though there have been, and will continue to be, many consolidation success stories within the search fund ecosystem, I suspect there will be an equal number of failures, though this latter outcome will surely be much less publicized. Though I’m not against consolidation theses in and of themselves, I do find myself more skeptical than most when presented with one. In today’s blog post, I’ll attempt to explain why

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In The Trenches

Why You May Want to Reconsider Your Industry Roll-up Strategy

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Acquisition Thesis in Fragmented Industries

Challenges of Consolidation Execution

Financing Strategies for Inorganic Growth

Remember Everything You Learn from Podcasts