What is a rollup?
So a rollup is a series of Acquisitions where a company is trying to scale up and it it involves purchasing similar businesses that are smaller than the Quire very rapidly in integrating them and the theory of a rollup is that you’re assembling a larger company through acquiring smaller companies and you’re sort of making it bigger and at the same time as you’re making it bigger you’re making it better you and you’re also arbitraging you’re buying companies smaller companies at lower prices and you’re putting them all together and theoretically you’re able to get a much higher price so that is a rollup and it’s a very common strategy in the acquisition financing world.
How many rollups have you been part of too
Many very battle tested and have to say 40 or 50 rollups over the last 30 years I’ve been an entrepreneur leading a rollup as a Chief Financial Officer I’ve Been A lender to many rollups and I’ve been an adviser to many rollups over the past 24 years all different types of businesses hospitals, outpatient health care services companies, technology companies manufacturing companies.
Explain what Target focus is and why it’s important?
So, Target Focus means like do you really know do you have a laser like focus on the type of business that you want to buy because Target focus is Destiny to roll up success if you don’t have strong conviction as to what you’re going to buy and if you don’t adhere to that Focus then it really there’s no point in doing a rollup because when you put businesses that really don’t belong together and don’t fit together relatively easily you’re really not doing a rollup you’re just buying more companies and you’re creating what I would call as really more of a pileup of ill-fitting assets, so the targets have to be things that you can plug in to your existing platform where you know that you have the operational resource to integrate them very well and the integration occurs really before you even close the deal the integration happens as you’re planning the close and immediately after you make the close so you really have to it’s not as much can it be financed am I buying it at a low price is it a good fit and as a result you really have to know you have to really be focused on the Target and on the things that it’s going to bring to the company to make sure that it will cohere with the entire group.
How do you establish Target Focus?
Well I think it I think it almost starts before you even get to the acquisition stage, I think it becomes it gets down to identifying your operational and integrational strengths as a business owner you need to know can you really absorb these businesses and make them part of the whole or is it a completely different exercise something you’ve never done before which is going to bring a lot of risk into the equation I think you also have to research the number of available targets that you have so that you can focus properly because you might think that you want to buy very small companies only to realize that when you go to the to see what’s out there in the market that there’s bigger companies available and frankly we see a lot of people bringing us rollups where they have really small companies that they’re going to do you know a deal a month and they’re going to do 10 or 12 deals a year and that’s just a tremendous amount of risk from an execution standpoint lenders really don’t like high levels of risk with a rollup so you really want to look at the revenue that’s available in terms of the targets and you need to make sure that there’s enough of those companies available for you, inevitably it means focusing on sourcing deals from multiple places and you also want to be very open-minded about what you’re paying for the deals because a lot of times the best deals are going to cost you more but you’re going to get more it’s sort of like you get what you pay for if you’re paying more for a company that has better resources where it’s a better fit and you know you can manage that integration more easily then it’s very much in your best interest to focus on that and then I would say in all deals when you’re trying to build up a pipeline you need to give yourself time so generally these things take longer to execute so I would say be patient because it could take 18 months to kind of get your first deal done once you start.