The power of one – Identifying potential pitfalls can help enhance value in a roll-up

Description

Abstract: Operating inefficiencies are one of the biggest struggles small and midsize borrowers face — and those that lose the battle may go out of business. A roll-up, where several smaller companies in the same or similar industries join forces to form a larger company, can reinforce a struggling borrower’s defenses. This article discusses the advantages of roll-ups, which go beyond economies of scale and synergies. From an underwriting perspective, a larger company is an easier sell than a smaller one, providing greater access to capital and more favorable loan terms. However, inattention to consolidation issues can lead to disaster, so companies should approach this strategy with caution.