Looking for people willing to share their Rollup experience

searcher profile

March 19, 2024

by a searcher from Harvard University - Harvard Business School in Austin, TX, USA

Hello! I am early in the process of rolling up beauty salons and looking for people who are willing to share their experience with rollup strategy. I'd love to hear from your journey and get any advice on pitfalls and areas to consider. Separately, if you can point me towards any resources on rollups, I'd greatly appreciate it. Thank you!

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commentor profile
Reply by an investor
from Northeastern University in Seattle, WA, USA
I've only been witness to one particular rollup (Amazon 3rd party Sellers), and many players trying to roll up, going after the same targets...Thrasio's bankruptcy points to the fact that it ended badly.

Rollups are on the whole, I believe not successful, but the needle can be threaded if the downside is severely de-risked (no money down, or no more than 1x upfront). I do believe though at the end of the day, all industries consolidate. It may not be a monopoly, perhaps an oligopoly but ultimately all industries consolidate, and I think that THAT is when the roll-ups value comes to light. However that's assuming that the companies doing the roll ups can survive to that point (over levered).

For beauty salons, I guess you could roll a bunch up in an area and either brand them all the same or keep them all differently branded (then you aren't really getting synergies) but I'd wonder what would prevent someone from then just opening up another beauty salon, and thus what's the true moat one is developing by rolling the businesses up? Fragmentation exists for a reason.

There's also a significant, often underestimated, super power that individual small business owners have of persistance and drive that gets lost when businesses get bought by a larger company and then handed over to a GM. That's why there's a franchising middle ground.
commentor profile
Reply by an intermediary
from Texas A&M University in Tyler, TX, USA
I'm currently VP of Finance for a PE backed Home Health & Hospice buy and build, executing 18 transactions over the last 3.5 years. I echo many sentiments from the above, but will share what I feel to be the most important here. Have a disciplined approach to evaluating deals, as many noted above. Create your "buy-box" and don't stray from it. Spend as much time as you can in the Pre-LOI diligence phase to truly see if you want to close on the asset. I think it is important if you put a deal under LOI, you have a high close rate. Invest heavily in the integration of the target in the LOI diligence phase, and really dig into culture of your target. Some of the worst integrations I've experienced were attributable to joining two companies with different cultures. I look at culture of the target as one of my highest priorities outside of financials. If you can devote an FTE or team to the integration outside of your core operators, that will further help your post integration risk and allow your core business not to suffer during the integration of a tuck in. Best of luck!
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