Business “Roll-Ups”: Beware of Possible Fraud Risks

A “Roll-Up” is the name generally used for the merger and acquisition strategy of combining several smaller businesses in the same sector into a larger operation.  The motivation for the acquirer, who is often referred to as the sponsor or consolidator, is straightforward and can be summarized into four steps:

1.    Pay a low multiple of earnings for the acquisitions
2.    Realize synergies and cost savings by bringing many similar businesses together
3.    Package and sell the consolidated group at a higher multiple and higher projected profit margin
4.    Generate a sizeable return on the investment

Please subscribe to read the rest of this content and enjoy the full benefits of Financial Fraud Law.