Professional Documents
Culture Documents
Rollup Companies
Rollup Companies
Successful Rollups
Kraft foods was originally a roll up in the dairy industry which later
ventured into acquiring snack food and grocery brands.
Failed Rollups
US Office Products had a huge run beginning in 1994, but declined badly
by 1998.
Research has shown that around two thirds of rollup companies have
failed to create value for investors.
Ideally have low overhead and high free cash flow (money can be taken
out of the business to buy other businesses to compound returns).
Each business has solid growth and good future growth prospects
individually.
Many of them are brands you know. All companies have significant
competitive advantages. Usually valuable branding, significant industry
position, or niche markets.
Most have high free cash flow and are financially sound with good prospects for
the future.
Business owners are more than willing to accept prized BRK.A stock above net
asset value as payment when they sell to Berkshire. This gives them the
ability to make huge acquisitions. The reputation of BRK.A stock is paramount
to this end.
Its so big that the good returns have already been had (mostly from
80s to the late 90s), though I still think Berkshire will do well.
If you are thinking that you wish you would have signed up back
then, I have good news. I found someone who is using the
Berkshire business acquisition compounding model very
successfully.
Bio.
He created good value selling off the parts of the company, but
decided he wanted to be a builder of companies and not a
dismantler.
Jarden Brands
Many Jarden brands are things that you use every day.
You can see the long list of Jarden brands at their website HERE.
Its all stuff that you see filling Walmart and Cabelas shelves.
Spectacular Returns
The market loves a company with strong organic growth and gives it a
high valuation based on future projected growth. Investors do not
know how to value a bolt on acquisition growth company like Jarden
because it is not known what Jarden will buy next and therefore difficult
to make future projections. Due to this issue, Wall Street does not
value it the same way, so it has been perennially undervalued. The
stock rises when an acquisition is announced typically.
The value of Jarden stock was derailed by the financial crisis, however
the strong competitive advantages that Jarden products possess held
up and the market eventually rewarded patient JAH shareholders with
large gains from the beginning of 2012 and onward. Jarden has proven
that it is strong in times of crisis.
The blank check IPO was held at an initial price of $10 per share.
Initial Acquisitions
Specialty chemicals companies are low overhead and high free cash
flow because they do not make chemicals, they just mix them.
Chemicals are purchased from a high overhead business such as
Dow, Du Pont, or BASF and mixed using proprietary formulas and
then sold to end users. They can grow without building huge
factories.
Nomad Foods
Investment Thesis