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.
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Industry Roll-up Characteristics
- Fragmented industries offer a large pool of potential acquisition targets.
- Smaller companies often trade at lower multiples, creating arbitrage opportunities.
Fragmentation Considerations
- Industry fragmentation often stems from low barriers to entry and intense competition.
- Companies in fragmented industries often lack unique differentiators beyond price, reputation, or quality.
Consolidation Challenges
- Consider the challenges of acquisition integration before pursuing consolidation.
- 50-80% of M&A deals fail, so understand the potential pitfalls.