Roll-up strategies consolidate highly fragmented markets where current competitors are too small to achieve economies of scale. Some recent examples are:
- funeral homes
- occupational health
- domiciliary care
- dental practices
Size is not what creates a successful roll-up; what matters is the right kind of size. Multiple locations within a city may be more important than many branches spread over many cities as cost savings can only be realised if branches are near one another. Conversely some cities may only be able to support one branch.
Identifying a successful strategy is not the main issue though. In fact, successful roll-up strategies are hard to disguise, so they invite copycats. As others imitate the strategy, prices for the individual operators will eventually bid up to levels that makes additional acquisitions uneconomic.
Nexus Corporate Finance now wants to hear your thoughts on roll-up strategies - please take two minutes to respond to our survey (follow the link below to SurveyMonkey) - results to be presented at the end of June.