Rollup Aggregation
What Is A Rollup?
In the context of mergers and acquisitions, a “rollup” is an arrangement that is aimed at having the company listed on the stock exchange, and, being much more appealing in an Initial Public Offering (IPO). A rollup is a situation where multiple small companies operating within the same environment consolidate and merge so that they can create an advantage for themselves
Advantages of a Rollup
Economies of scale is an advantage reaped through a roll up. It is received in two (2) forms – firstly, a company that generally outsources various parts to create its final product can now ‘roll up’ with a company that creates those necessary components. It will mean that the company will no longer need to rely on external sources, and instead, can finalise the product all internally. This will reduce expenses that were previously incurred as there is now a streamlined process.
Another advantage is that there is a now an increase in market reach; for instance, a company in Australia merging with a company in America will provide for access to a wider market.
A company that use to sell a certain product will now have the ability to sell the product of the company of which they merged with. A demonstration of this is where a company that sells portable chargers can now also market and sell cables to go with the chargers, rather than having to outsource the cables.
Finally, the small companies are able to gather their resources and revenue into a single holding thereby making it a much more attractive company overall.
How to Rollup
To successfully complete a roll up strategy requires meticulous planning, not only from a commercial perspective but also a legal perspective as there many rules and regulations that must be followed. There is no single process or mould that will be applicable to every situation, that is why professionals should be consulted to received proper advice as to how to proceed.
A dedicated team should be established that possesses a legal team with strong commercial acumen so that they are able to effectively identify prospective companies, analyse financial information efficiently, are knowledgeable of the law and have extensive negotiation skills to increase your chances for a positive outcome.
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