Several weeks ago, I met with an entrepreneur who was wanting to purchase several companies and consolidate operations. He was emphatic that he was performing a “consolidation play” not a “roll-up”. I mentioned that it seem to me that he was describing a “roll-up” and that those don’t work! He corrected me by saying again that it was a consolidation play not a roll-up. My thoughts were if it walks like a duck, talks like a duck, then it must be a duck! So my question is… Is this any way to bake a cake? (Or build a company?)
This conversation brings up an interesting analogy. If you going to bake a cake and had the ingredients for five different cakes and the cakes were all chocolate, but were all different in the other ingredients. You probably would not attempt to create a cake by combining all of the ingredients? Why do people think that it is any different with companies?
Most banks require a company to have been in business three years before they will consider lending them money. Furthermore, have you ever noticed that it takes 10 to 20 years to build a successful company? Building companies involves establishing a culture with a unique chemistry of people. It is difficult, perhaps impossible, to do this overnight. It takes time. You can’t combine the ingredients from five different cakes, shorten the baking time in half and expect to be able to eat the cake. The same thing goes with companies! Roll-ups don’t work!