Successful roll-up cases in Germany?

searcher profile

March 21, 2021

by a searcher from INSEAD in Hamburg, Deutschland

Did you come across search-funds successfully conducting a roll-up model? I'm considering this approach in Germany and would highly appreciate your experiences or any contacts. Thanks a lot in advance.

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Reply by a searcher
from University of Texas at Austin in Fort Worth, TX, USA
Obvious advice, but the business model you choose to roll up is critical and should be long-considered. I would only target industries where people are successfully rolling up companies right now.

A less intuitive key learning I had working in PE was the incredible difficulty of integrating businesses. Most acquisitions don't add value and a lot of times it's because of integration issues. The multiple arbitrage is tantalizing and easy to see, but the executing integration can be difficult, so don't underestimate that. I would personally target business models where acquisitions could operate rather independently and do not need huge merging of teams (e.g. medical practices and auto shops come to mind). There are probably fewer cost synergies with businesses that operate more independently - on paper - but the ease of integration is worth it, imho, if your primary goal is targeting the multiple arbitrage in the lower middle market, which I am assuming you are.
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Reply by an investor
from New York University in Berlin, Germany
@Alexander: In my head I was at 10m Equity, 20M Debt. Not sure if you can get more leverage for these small deals in Germany. So if you look at a nucleus company with about 2M EBITDA this (depending on the industry) can be anything from 7-15M of this 30M overall. Then you still have enough for another 3-5 smaller add-on acquisitions which for me is the minimum to call it a roll-up strategy rather than opportunistic M&A.
Obviously, everything is dependent on the industry, how synergies can be realized, etc.

Take my reasoning with a grain of salt as I don't look at traditional searchfund targets and financing structures.
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