From my previous post, you should now have a good feel for the characteristics of industries where a roll-up strategy will stand a fighting chance of success. But what are the characteristics of individual private equity firms that correlate to a skillful and lucrative roll-up? That is what I will cover today. Unfortunately, there is not a one-size-fits-all strategy for success. Nor is there a cookbook recipe I can give you that is guaranteed to lead to a successful roll-up. But firms that do roll-ups well definitely offer some patterns to study and emulate. Let’s take a look at them. What Ar ..read more

Test your knowledge of the three primary financial statements with this handwritten quiz. The three financial statements are the income statement, the balance sheet, and the cash flow statement. In the video series available on ASM, the financial statements are introduced in the context of building a three-statement model, which provides the foundation for most in-depth financial analysis and valuation work. The objective is not simply to explain what they are, but to demonstrate how they link to each other. But if you want to get good at something, it really helps to test yourself. I’ve ..read more

Is bigger always better? For years it has seemed that way, as the number of private equity firms executing roll-up plays has grown. According to Bain, back in 2003 the number of add-on deals executed globally was below 500, with only 21% of those representing the fourth or later acquisition by the acquiring company. In 2023, there were 5,769 such deals, representing an increase of over 1,000%, with 49% of these deals representing the fourth or later acquisition. So why do so many want to play the roll-up game? Multiple arbitrage is one reason. Since the market has long rewarded larger busines ..read more

Last week Bloomberg published an article criticizing luxury goods maker LVMH for unpaid labor in a supply chain that enables the company to sell a $9,000 vicuña sweater. I made a short video (TikTok | IG) about it with an original conclusion that I found the article’s approach “kinda slimy.” I find it frustrating when the media attacks companies for success. There are plenty of examples of bad behavior that warrant such attacks, but success shouldn’t be one of them. And occasionally an attack misses the mark entirely. A common example is a journalist reporting that a consumer staples company ..read more

Greek philosopher Aristotle (384-322 BC) supposedly knew everything there was to know in the ancient world. With all due respect to his intellect, I doubt he could pull that off today. The growth of human knowledge has exceeded even the greatest scholar’s bandwidth, leading most people—especially in their professional lives—to specialize in learning a subset of things very, very well, whether it’s orthopedic surgery, JavaScript programming or even something like healthcare private equity. As I wrote in a previous post, PE firms are increasingly applying this specialized approach to their inve ..read more

If you are interested in investing, you should know about serial entrepreneur and investor Brad Jacobs. His recently released book, How to Make a Few Billion Dollars, is a master class in acquisitions, roll ups, and “big, hairy deals,” the kind that sometimes create a ten-figure net worth. (Quick video introduction: LINK.) BUY-AND-BUILD HISTORY Jacobs started playing the entrepreneurial game early. In 1979, three years after dropping out of Brown University, he co-founded Amerex Oil Associates, serving as CEO until selling the oil brokerage in 1983, at which time it had offices worldwide and ..read more

Let’s say you’ve caught the entrepreneurial bug and are ready to go all-in. What’s the next step? You could build a business from scratch, of course, if you have a good idea and the motivation for that type of work. Or, you could look for an existing business to buy and run. More and more people are choosing the latter as a career path, and you don’t necessarily need an MBA to do it. In this post and the next, I’ll cover some of the basics of what it requires. In the private equity world, looking for a business to buy is called a “search” (or sourcing a deal – links to lessons that cover sour ..read more

The world of private equity is notorious for grinding, 100-hour workweeks, particularly in the case of younger professionals. But like any job, there are always stretches where your firm’s deal flow (and urgent, need-it-done-yesterday work) slows down. That’s when private equity professionals may occasionally find themselves asking: how do I fill the hours between 9am and 6pm? It’s a timely question, because aggregate deal volume has been declining since a record-breaking 2021 (see figure 1 below), as interest rates and fears of economic headwinds have increased. However, that doesn’t mean pri ..read more

The three financial statements are the income statement, the balance sheet, and the cash flow statement. In the video series available on ASM, the financial statements are introduced in the context of building a three-statement model, which provides the foundation for most in-depth financial analysis and valuation work. The objective is not simply to explain what they are, but to demonstrate how they link to each other. I studied some accounting in college, but there was a problem. Accounting was introduced as the language of business, but the approach made it difficult to see the forest ..read more

The goal of any search is finding a business to buy and run. But as anyone who has actually run a search can tell you, the process is much more marathon than sprint. And before taking the first stride, you need to know the route that will—hopefully—lead you to the finish line. Based on conversations with numerous friends in the search world (some of whom have already bought businesses and some of whom are still searching), we’ve assembled a high-level guide to the major steps involved in launching and carrying out your search. While the process can vary based on considerations such as whether ..read more