Using the Roll Up Strategy to Maximize Multiple Arbitrage
2022 has carried forward the outstanding mergers and acquisitions surge of 2021. Now that we’ve entered Q4, Springtree Group continues to help our clients negotiate strategic deals. Our goal, as always, remains to maximize your capital during this time of prime opportunities.
For both small- and medium-sized agencies, we may suggest BUYERS employ the roll-up strategy, thus maximizing the multiple arbitrage. Today, we’re offering a brief overview of this approach. We hope our doing so helps you determine whether this is a process that holds appeal for you in Q4 and beyond.
What is a roll-up strategy?
This strategy is the process of combining at least two agencies into a unified, larger entity. The resulting company can pool resources from each side, thus reducing overhead and optimizing revenue.
Once combined, two or more independent agencies will provide expanded territories, books, products, and virtual interfaces, as well as prime opportunities to cross-sell thanks to these enhancements.
In short, roll-up strategies are employed when Buyers wish to combine two or more agencies to create a single, larger company that is more valuable than the initial sum of disparate parts.
When should sellers consider a roll-up strategy?
Agencies offering products or serving clients who are predicted to grow significantly are safer investments, making them among the first to be purchased by investors pursuing a roll-up.
Agencies that service easy-to-manage sectors are easy to integrate, making them perfect as either 1:1 mergers, or as single acquisitions to be bundled into an existing, larger company.
When two or more agencies are located in comparatively isolated regions, forming a unified company that spans the two usually results in stronger multiples.
Agencies that hold a dominant position in a single region are usually excellent investments for larger companies. The company that’s well-known on a state-wide or national level can offer substantial purchasing power to the independent agency, which in turn brings a large and loyal customer base into the corporate fold.
When two or more agencies offer the same niche products, combining into one can help provide the opportunity to diversify, even if only within the niche.
When should buyers search for companies that have opted to roll up?
If you have the available capital to invest, we do strongly recommend purchasing one of our expertly blended agencies. Few other strategies offer such economies of scale, particularly because overhead costs are reduced, and potential staffing configurations are exponentially increased.
How will Springtree Group launch your roll-up endeavor?
As much as we would love to offer you a pat answer to this vital question, the truth is that our roll-up process is customized to each unification of two or more entities. If this article has sparked your interest in pursuing a roll-up strategy, contact Springtree Group today.
We will partner with you to create a merger that will net bids from qualified, motivated buyers who have been briefed on the benefits inherent in pursuing roll-up investment opportunities.