Buy Hold Sell

Most investors will remember Slater and Gordon for its spectacular unwinding in 2015. However, as the chart shows, there was ample opportunity to pocket handsome returns. So what should you look for in roll ups, what makes some better than others, and is the current backdrop favourable for this strategy?

The ones I don’t like are service industries… where the value is really in the human capital and if they get a big amount of cash upfront on the sale of their business often the incentive isn’t there.

Key Points

  • Roll up strategies provide companies with a ‘morphine’ hit to their earnings
  • You need to look for business that offer genuine benefits of scale and where the whole is worth more than the sum of the parts
  • Avoid roll ups where the value is in human capital such as professional services firms
  • Be cautious of very large and dilutive acquisitions

Four Hot Roll Ups We're Avoiding

This report from Avoca Investment Management looks at four hot roll ups that they are keeping at arm's length. Read Article


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