Industry roll-ups often look good on paper. Rapid acquisitions that are earnings-per-share accretive can boost profits and enable capital raisings to buy more business.
Better still, earnings that were bought on private-sector valuation multiples (many industry roll-up plays buy smaller privately-owned firms) are suddenly valued on listed-company multiples, supercharging the roll-up’s valuation.
Some roll-ups try to grow too quickly. That is probably true of Retail Food Group, which has been hammered in the media this year after franchisee complaints. In the quest for growth, management of roll-ups, generally, can buy the wrong businesses or pay too much for them.