What to Expect When Selling to a PE Firm as Part of a Roll-up

**Brandon Blewett** (0:00)
I started this business because I either love sales or I loved what I do. So many of our presidents love being on the pavers, right? They love the work.
Starting a paving company, they did not foresee that I'm going to have to be the accounting department. I'm going to have to be HR. I'm going to have to deal with commercial insurance. We're able to offload all of that back office headache for them. We wire all funds the day of close, so that would all be in their bank account once the wires are cleared. I think the biggest mistake that I see is they try to tackle everything without asking questions and they experience paralysis by analysis.

**SPEAKER_2** (0:41)
Welcome to M&A Talk, the number one podcast on all things related to mergers and acquisitions. Brought to you by Morgan & Westfield, a nationwide leader in mergers and acquisitions for small to mid-market companies. We bring you exclusive interviews with industry experts in business sales, valuation, private equity, investment banking and more. It's our mission to provide you with insight and guidance on how to build your company's bottom line and maximize value for eventual sale. Here's your host, Jacob.

**Jacob Oros** (1:14)
This is your host, Jacob Oros and president of Morgan & Westfield. And if you're considering selling your company and if you'd like to work directly with me throughout the process, you can schedule a free consultation at morganandwestfield.com.
And also if you'd like a free copy of one of my two recent books, The Art of the Exit or Acquired, I'll have those linked in the show notes as well.
And if you have any ideas on how to improve the podcast, I'd love to hear your ideas. You can send an email to podcast at morganandwestfield.com. And now on to today's show, we're going to talk about a topic that we've never talked about before, and that's a roll-up. What the heck is a roll-up? And we're going to tell you exactly what it is, how it works and what's in it for you as a business owner. And just at a very high level here, if you do own a company and you're considering selling it, there is a chance that you could sell it to a private equity firm that is doing a roll-up in the industry or in your industry. And that's what we're going to talk about today. So if you do own a business, this show is going to be very helpful for you. And Brandon, welcome to the show.

**Brandon Blewett** (2:27)
Thanks for having me.

**Jacob Oros** (2:28)
So let's start off with a punch. For those that don't know, if you're not an entrepreneur, this is important for selling your company. We'll tell you, we'll explain later why that's the case. But what's a roll-up in a nutshell?

**Brandon Blewett** (2:39)
So in a nutshell, a roll-up is where a private equity investor will go in and find a certain type of business that is largely fragmented in the market place, and will try to cobble together several of them to create a larger platform entity, and then gain scale through acquisitions.

**Jacob Oros** (3:01)
Got it. Lots of benefits there, multiple expansion for the private equity firm, synergies, and so forth. What industry are you in that this is happening now?

**Brandon Blewett** (3:11)
So we're in the construction industry, and more specifically, we're in paving. And within paving, we are in the repair and maintenance space. So a lot of our work is focused on parking lots, working with commercial customers to make sure that parking lots are paved, repaired, striped, and patched appropriately.

**Jacob Oros** (3:31)
Now, did you start with the private equity firm, or how did you get into this?

**Brandon Blewett** (3:36)
So it was a mix of both. So when I interviewed with the company, I was at a consulting firm. I had done a previous stint in CorpDev at a building products company, and I was introduced to the private equity firm. They were looking for someone to come in and build the M&A engine, the corporate development function. So it started with the private equity firm, and then I met the management team that they were building out before I took the position.

**Jacob Oros** (3:59)
Did they build that management team before they did their first platform acquisition?

**Brandon Blewett** (4:03)
They did. It's actually really interesting. So we are co-sponsored 50-50 between two private equity firms, two firms who are doing the same roll up strategy, and the principal of one firm was really good friends with the principal of the other firm. And they said, hey, instead of competing against each other, why don't we complete a merger of the two? And then once that merger went into effect, they said, hey, instead of the private equity firms running M&A, we need the company to be able to do it itself.