Characteristics of a consolidating industry sedating cat air travel
Waste Management's acquisition of 133 small-time haulers quickly became the largest waste disposal company in the US.
The characteristics that can make a rollup attractive are: there are many small players in fragmented markets or: where technology can play a role in revitalizing industries with small margins but technology can impact growth and profits.
An investor faced with an opportunity to invest in two competing companies may reduce risk by simply investing in both and merging them.
Rollups are often part of the shakeout and consolidation process during an economic downturn or as new market sectors begin to mature.
Looking at the ratio of deals to companies by year, you can see four main clusters, with the most recent three-year period comparable to the run-up to the financial crisis (lots of deals relative to companies).
We can also look at the ratio of deals to companies by industry.
Auto Nation was also a successful rollup effort in the car dealership space spearheaded by Wayne Huizenga, founder of Waste Management.
Deal advisors perhaps less so, because as we’ve already seen, deals are driven by people as often as economic forces.In this view, you can see the past bubbles in a few industries and the consolidation in others occurring now.