There were more industry consolidations through roll ups in the 1980s and 1990s than over the past few years. That’s because individual investors were able to line up the financing more readily. Roll ups weren’t as popular in the late 1990s when employees had a good chance to purchase businesses. But roll ups are again popping up around the country as Baby Boomer business owners look for exit strategies that can replenish retirement funds lost during the 2008 implosion of the financial industry. The idea of a roll up is also becoming more appealing to family held companies because the members of the second and third generations are increasingly reluctant to work as hard as their parents did for so little return on their investment of long hard hours and sacrifice.
In some ways, the roll up process saves a business owner a great deal of time and effort. Plus the business owner learns what his/her business is really worth. The leader of a roll up must understand how money works. He/she approaches several owners of competing businesses within a growing industry. After a series of discussions with individual business owners, the roll up leader now has a sense of which owners are really ready to retire and who still want to be active in their business. He/she also gets a sense of which competitor has strong marketing and sales, which has better operating and administrative procedures, and which focuses most on customer service. The series of interviews helps the person who leads the roll up to decide which locations, systems, and would be retained once deals have been finalized. I have participated in a handful of roll ups. You really would want to be a fly on the wall to learn what a prospective roll up leader knows about you, your competitors and your industry. Let me tell you…you would feel naked.
I am seeing more situations where employees are stepping up and asking for the chance to buy shares. Some are requesting that their owners look at ESOPs, which are also not as popular as they were in the 1990s. As a person who is focused on economic development, I am concerned about the increase in roll ups because they involve so many secret meetings. The process is distracting. Growth of businesses slows. Employees can misinterpret what is happening. I understand why it can be difficult for owners to discuss their retirement plans and exit strategies. But the economy, customers, and the retiring owners are usually better served if/when employee ownership options are considered well before the owner gets too tired. I am certainly glad that we executed an ESOP in the 1990s. And I have recently restructured my enterprise into a suite of companies. This way, multiple partners can be involved and focus on what they do best. And I have more exit options when that time comes.
Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions. Her midsized BtoB clients get on and then stay on the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieving accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search. 2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.