Industry Consolidations & Roll Ups

A roll-up is the consolidation of several smaller businesses into one large operation. Generally these businesses operate in a fragmented industry and lack strong management and capital. Combining forces can create efficiencies, marketing depth, buying power and access to less expensive expansion capital.

Any industry, typically with comfortable profit margins of at least twenty percent and a commonality of services, products and operations needs can be a roll-up candidate. It’s easy to see how major benefits can be reaped from volume purchasing, new technology, and perhaps most important, professional management.

A good example of a type of industry that easily fits the roll-up profile is the funeral business. Other industries that make effective roll-ups are hospitals, computer technology, printing, staffing, and trade magazines. There is no end to the types of companies that lend themselves to a roll-up as long as the industry is fragmented and has the following characteristics:

1. Industry size - The industry should be large enough to prevent a single sizable roll-up from controlling the industry. A single roll-up, even when large, should not comprise more than ten percent of the industry as a whole.
2. Platform Company - A platform company typically has a recast EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of at least $2 million.
3. Cost–cutting opportunities - Impressive economies of scale should be achievable through volume purchases, pooled resources and sophisticated operating systems.
4. Management Ability - There must be experienced and highly qualified executives to manage a platform company and lead the roll-up.
5. Marketplace connections - There must be industry specialists available such as investment bankers and others familiar with the industry and its characteristics.

Amvest played a significant role in several industry consolidations including: office products, business forms, printing, labels, rent-to-own, staffing, and information technology.

Amvest coordinates the entire consolidation process from the conceptual stage to the exit strategy. In addition to our experience in doing roll-ups for others, our President has structured roll-ups from beginning to end for his own personal account.

Amvest combines the components necessary to accomplish the consolidation including industry executives and management team members, platform company candidates, equity partners, financing sources and acquisition targets. Amvest continues to assist throughout the consolidation process by serving as the in-house mergers and acquisition department, providing integration and strategic planning, operations assistance, industry updates, and serving as a board member.