Rollup industry

Sammtm's picture
Rank: Chimp | 6


After selling my own business I have now got my eyes focused on doing a rollup. I have the right network and experience to join me on this venture and have gathered a very strong board. I missed the mark on an industry we were looking to do a rollup in. Long story short, we were in talks with the first company to buy, but the average of the 'rest' of the companies we looked at performed much worse than we initially thought (low EBITDA's), so we would run out of runway quite quickly as there were much less good targets than we initially thought.

So, a change of industry. Board is okay with it and understand the situation. Don't mind a change of industry. However, I can't discuss my cold feet with the team, so I turn to WSO to brainstorm on this. I'm having a hard time finding the right industry. Ideally we're looking at an average of at least 15% EBITDA margin. Selling for 2-5 multiples. Preferably a boring business with sexy returns, and succession challenges (owners don't have an exit plan/follow-up). Have looked at funeral homes/funeral care, but 80% is a proprietorship. Vets (animal doctors) are 30% rolled up in my country, same goes for dentists, day care. Home health is all regulated in my country.

I'm from Europe so I understand industry structures and margins may vary from US, but any insights on where to look / where you're seeing a lot of deal activity in would be much appreciated!


Comments (3)

  • VP in PE - LBOs
Feb 18, 2020

$1bn question....

My 2 cents: do the rollup in the industry with low margins where your platform company has high margins and apply best practices to the targets. You have industry knowledge and potentially also execution power here, which any other PE does not.

Don't overlook regulated markets (but appraoch with caution).

Think to structure and focus the discussion, you should provide some info on availability of capital.

FInally, buying 15%+ EBITDA companies at 2-4x in Europe these days with strong cash conversion: keep on dreaming. You can lever up 3x at 0 costs so 5 is the minimum.

    • 1
Feb 19, 2020

Thanks for replying. We raise the equity part on a deal by deal basis, the team is willing to put up capital as well as my network of high net worth individuals. Theres millions available, but we want to use as much debt as healthy possible. Will usually have to put up 10% of our own equity.

Feb 19, 2020