Many founders honestly commit to staying after an acquisition but underestimate the psychological shift from owner to employee. The loss of ultimate control often leads to their departure, despite their best intentions and contractual obligations. Diligence must assess this psychological readiness.
To counteract the natural pressure to "do deals," roll-up operators should build an overwhelmingly large target pipeline. Scarcity creates a "must-win" mentality, leading to poor decisions. An abundant pipeline makes it easier to say no to subpar opportunities and stick to the investment thesis.
There is no single "best" integration model for roll-ups, as market preferences cycle between full, partial, and no integration. Rather than chasing a perfect model, successful platforms pick a clear strategy, apply it consistently, and build a coherent narrative for their future exit.
Experienced board members provide maximum value by defining the acquisition framework and target criteria upfront. Their involvement in a specific deal's diligence is often too late, leaving them with only a "go/no-go" decision, a tool to be used sparingly, primarily to enforce the agreed-upon framework.
Private equity firms leverage industry advisors for more than just expertise. A crucial, often overlooked role is to provide sellers, particularly founders, with a sense of security. The advisor vouches for the PE firm's reputation and intentions, which can be critical in getting a deal over the line.
M&A teams often kill their pipeline by applying overly restrictive criteria at the long-list stage. A better approach is to be more lenient, focusing on only 3-4 critical criteria. This creates a large pool of potential targets, fostering a healthy funnel dynamic instead of a restrictive "must-win" tunnel.
The biggest challenge for a roll-up's management is balancing M&A execution with operations. Teams often excel at one but neglect the other. Successful platforms require a leadership blend, sometimes through a dual-CEO structure, to cover both hunting for deals and managing the growing core business.
If a compelling target company doesn't align with your M&A framework, don't just kill the deal. Use it as a prompt to re-evaluate your strategy. The target might be a sign that your initial assumptions were flawed. The choice isn't just "yes/no" on the deal, but "is our strategy still right?".
Private equity funds, driven by IRR targets and fund lifecycles, often pass up good exit opportunities in hopes of maximizing returns later. This can backfire if the market turns. A better strategy is to sell opportunistically into a rising market, even if it feels early, rather than risk missing the window.