The Project Corp
The Project Corp

Industry Roll-Ups

By Brad MacLiver


Industrial Roll-Ups are where one industry's many players are consolidated in small groups for economic benefits. Recessions new government regulations or other aspects of the industry, which can reduce profits end up incentives to conduct an industry roll-up.


A main reason for any roll-up is to achieve economies of scale in marketing, operations, purchasing, information systems, logistics, and distribution. When consolidated companies also have less risk from the effects of dissatisfied customers and have greater ability to recruit and retain key personnel.


Industry roll-ups can be initiated by investors seeking investment opportunities or by a major company in the industry. Companies acquired in a roll-up are usually small, independently owned businesses whose owners believe in the economic benefits of combining forces with a larger organization. Owners of the acquired companies also have the option to walk away from the daily headache with large checks, labor agreements, and may be rewarded with pension benefit plans.


An example of this is the pharmacy industry. It is a well established industry, but has experienced a growth in customers while experiencing cuts in reimbursements from both the government and insurance companies. Even as sales increase, pharmacies have seen a steady decline in both their profit margins and business values.


To counter the decline in profits, pharmacies with better financial resources acquire the local competition. This results in more customer traffic through a single location rather than multiple locations. This can dramatically drive up total sales while driving down the administrative and overhead costs per customer.


To help finance the pharmacy industry roll-up has a funding program, backed by large funding sources, to fund up to $ 100 million per transaction. This allows an individual company or an investment group to obtain the required capital to purchase pharmacies in geographic areas - thus a pharmacy roll-up in the area.


Financiers are willing to provide the capital, because they recognize that combining the individual pharmacies ensures an overall business valuation that would be greater than if each of the individual drug stores business values were added together. This synergistic value reduces the risk of the financing the pharmacy roll-up.


Many pharmacies are successfully seeking financing to maintain their own businesses. As a change of strategy, it could be to their advantage to look at funding an industry roll-up in their area.


Wall Street and big companies have participated in industry roll-ups for many years. It could be financially rewarding an established company in a fragmented industry, to investigate possibility of a roll-up.


Steps of Industry Roll-up:

1. Find an industry that has many businesses who would benefit by consolidating.
2. Develop an investment group or define dominant player to lead the roll-up.
3. Obtain acquisition funding.
4. Target acquisitions by geographic, or other parameters.
5. Repeat step 4 until the parameters of the roll-up is completed.
6. When this new larger company has been streamlined and has a track record of performance, it is in a position to go public with an IPO, or sell to an even larger company. Great rewards can be obtained for the investment group that invested time and money in performing the industry roll-up.


Some industries that have experienced industry roll-ups:

Computer Services
Internet Services
Temporary Staffing
Waste Management


Tips for creating an inductry roll-up:
1. You don't need Wall Street to start an industrial roll-up.
2. Companies can provide greater benefits to their customers, employees, and the bottom line when involved in an industry roll-up.
3. Companies in bankruptcy may benefit from being bought out.
4. Investment Groups purchasing businesses in bankruptcy may find advantages in debtor-in-possession, and post petition financing.




Sales Reps Needed

Targeted Business Pharmacy Acquisition Project




Social Connections for

Pharmacy Owners, Buyers, and Brokers: