Wall Street’s Love Affair with Roll-Ups: Profit or Pitfall?

Johnny HopkinsPodcastsLeave a Comment

During their latest episode of the VALUE: After Hours Podcast, Taylor, Carlisle, and Trainer discussed Wall Street’s Love Affair with Roll-Ups: Profit or Pitfall?. Here’s an excerpt from the episode:

Tobias: Canadian roll up. Levered roll up.

David: Right. Yeah, the roll up stuff has always been– That’s an old time Wall Street trick.

Tobias: It makes it hard, because you got to deal with new financial statements every single time. With a big acquisition, every single time, so there’s no continuity.

David: Yes. They tend to be very well supported by Wall Street, because Wall Street is making a bunch of money [crosstalk] earnings.

Tobias: I don’t like the money. Yeah.

David: Right?

Tobias: Yeah.

David: All the way along, and they love selling that. And as long as the acquiring company has a higher PE and they’re buying lower PE companies, it’s earnings accretive, regardless of the economics.

Jake: Yeah, top line can look really good.

David: Yeah. One of my good buddies, I was at Credit Suisse with, who went over to Goldman Sachs, I remember he called me maybe 5 years or 10 years ago and said, “David, man, I just realized these roll up things are just a scam.”


David: I’ve done enough of them now to realize, once you’re done and you got no more to roll up, you end up with a business that’s got all these acquisitions. Most of the acquisitions were overpaid, and so they’ve got all this– just a junk pile of stuff that’s not really been fit together, but all the way Wall Street is making a ton of money. The acquiring executives are making tons of money. Their comps just going up because they’re a bigger and bigger company, they get bigger peers to judge comp against. Yeah, it’s a great money-making scheme for those that are in the know, but the investors, at the end of the day, usually get left holding the bag.

Jake: Well, David, there’s synergies at the end of the rainbow that are going to make it all work.

David: Yeah, that’s great point. The synergies are [chuckles] rolling there. That’s right.

Tobias: In the 1980’s, that sort of roll up was very popular. They called them entrepreneurs. They had their own index, the entrepreneurs index, and you’ll never guess how it finished.

Jake: In Australia, right? This is–

Tobias: Yeah, this was in Australia, which is why I’m skeptical. I’m always skeptical of anything. That’s a roll up type thing, which is why I probably missed Credit Suisse, not Credit Suisse, Constellation for a little while. Just looks like a roll up. But probably smarter than your average roll up. Berkshire’s a roll up, right? Smarter than your average roll up.

David: Yeah.

Jake: I don’t know if I would classify that. That’s a serial acquirer. But roll up to me tends to be in the same industry.

Tobias: Industry specific. Yeah.

David: It’s a consolidation theme, where there’s the synergies in a highly fragmented industry, we’re going to bring these companies together and see all these synergies. Fairfax is mostly rebounded from the Muddy Waters report. It’s surprising, because I thought the Muddy Waters guys did good work. But if they’re just leveraging their reputation to try to make quick buck on a short, that’s not a good look.

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

Apple Podcasts Logo Apple Podcasts

Breaker Logo Breaker

PodBean Logo PodBean

Overcast Logo Overcast


Pocket Casts Logo Pocket Casts

RadioPublic Logo RadioPublic

Anchor Logo Anchor

Spotify Logo Spotify

Stitcher Logo Stitcher

Google Podcasts Logo Google Podcasts

For all the latest news and podcasts, join our free newsletter here.

FREE Stock Screener

Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:


Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.