The Sponsor Roll-Up Pool
Sell your business for a guaranteed premium...
…By participating in a middle market sized transaction when it is time to exit.
Private Equity: Size Matters
Private Equity Groups (PEGs) are historically the interim step between main street transactions (less than $5M) and middle market transactions (greater than $50M).
They begin with a single acquisition that becomes their platform and then identify add-on opportunities, assimilate and repeat over 5-7 years until they have a large enough enterprise, with maximized EBITDA, at which point they exit as a middle market transaction or higher.
PEG platforms are based on;
- Size (A+A+A+A) which bundle similar businesses,
- Synergies (A+B+C+D) which bundle complimentary businesses that allow for cross-selling to the same customer base, or
- Both size and synergies (A+A+B+C+C+C+C+D+D).
Because a $5M transaction requires as much effort as a $50M or higher transaction, large buyers look for larger transactions to make efficient use of capital and effort. For example, Berkshire Hathaway (Warren Buffett) will not look at transactions less than $5B even if they meet all of their other acquisition criteria.
Size does matter.
Roupp Acquisitions Inc has developed the Sponsor Roll-Up Pool Program to provide Sellers the access and ability to participate in middle market sized transactions and capture value greater than their stand-alone business value.
Utilizing a blind confidential approach, Sellers continue to own and operate their business while we combine it alongside other Sellers into the Roll-Up Pool and then market the Pool to buyers as a larger group transaction. This eliminates private equity groups from garnishing all of the upside benefits when pooling smaller Sellers over time and instead shares these benefits with each Seller.
Upon closing, we guarantee Sellers a Premium greater than their appraised value as well as the ability to participate in additional net proceeds. For committing to the Pool and allowing the Roll-Up Pool, LLC the exclusive time to complete a transaction, Sellers are awarded an Early Commitment Bonus in addition to the guaranteed Premium. Premiums and Bonuses are based on when Sellers commit to the Pool.
If we cannot achieve a transaction size large enough to meet the appraised value, Premium and Early Commitment Bonus of all Sellers in the Pool, we will not close and the Seller never loses ownership or control of their business.
The Roll-Up Pool enables Sellers to capture greater walk away liquidity by participating in a larger transaction and reduces exit fees.
Example: Real Estate Developer Analogy
We combine your home (company) with your neighbor’s home (company) into a bundle (pool) and sell the bundle (pool) to a developer (buyer) as a single large transaction.
The developer will pay a premium for the bundled properties greater than the individual value of each home for access and efficiency of a larger project that they can do more with.
Let’s assume your company is worth $1,000,000;
We will guarantee you $1.2M plus upside.
We anticipate a $1.5M-$2.0M purchase price or a 50%-100% premium for your company.
The buyer will pay the majority, if not all, of the purchase price at close.
We anticipate a minimum cash at closing of 70% of the Pool transaction which should be equal to or higher than your appraised value with no further risk.
Final Deal Approval
Every Seller in the Pool will get to review the negotiated Pool's price and terms before their final commitment and exit.
You remain in control of your company until the end.
Larger EBITDA transactions enjoy higher multiples. Start with your EBITDA on the left and move across the various Multiples on the right to visualize the potential impact of higher multiples realized as part of a larger transaction. The below example is based on an appraised value equivalent to a 5x multiple.
Why will a Buyer pay a premium?
The reasons a large company will pay a large premium for a large pool.
Instant multiple arbitrage
A public company trading at 23X earnings can easily pay anything less and realize a net gain to the earnings per share.
If they pay 15X for the Pool’s $5M EBITDA or $75M then they realize a market value increase of 23X $5M EBITDA or $115M increase in enterprise value.
Instant jump in earnings
Accelerates revenue growth to meet or exceed the 20% growth per year that shareholders or investors demand.
With a $5M EBITDA Pool, an acquiring company with $10M EBITDA can grow 50% in a single transaction whereas an acquiring company with $100M EBITDA grows by 5%, etc.
Platform or Bolt-on acquisition
Create an instant market presence in a new niche or benefit from a synergistic product or service.
Create cross-selling opportunities or instant inroads into hard to get customers/clients.
Leapfrog the competition to become the largest player with a single transaction.
Defend your territory from other large buyers or competitors looking to leapfrog your current industry dominance.
Many large companies incentivize their executives through growth metrics (see 1 and 2 above) and/or meeting a certain quota
Think of buying a car at the end of the month when the dealership needs to hit its numbers.
You tell us what is important to you and we will incorporate your preferences into the promotion of the Pool.
- Do you prefer to stay on or prefer to depart?
- If stay, how long would you prefer to stay?
- If depart, do you anticipate working in or around the same industry?
- Is it advantageous to…
- …remove chips from the table now?
- …retain upside potential after the close?
Are you a ready, willing and able Seller?
READY: In a suitable state of activity and action. Prepared.
These are questions that better prepare you to sell your company:
- Do you know why you are selling?
- Do you know your ideal sell date?
- Are your current and historical financials, tax returns, entity documentation, asset list, customer lists, documented IP
ownership, employment records and other due diligence materials in order?
- Are you prepared to sign a contract when the time comes?
- When you sell are you buying another company, starting another company, going to work for someone else in the same industry
or a new industry or retiring?
WILLING: Enthusiasm about completing a task. Eager.
Making sure the seller is committed 100% to selling is critical. You aren’t forced to sell your company but you can’t really
just put your toe in the water either.
So once you are prepared;
- Will you return document requests, emails, phone calls or texts in a timely manner? Many requests are time sensitive and
any delay can cost you a good buyer.
- Will you allow buyers to inspect your company and records?
- Are you willing to consult an attorney or certified public accountant?
ABLE: Having the power, skill or means. Opportunity.
- Do you have the authority to sell or is there anyone else required to make the decision with you?
- Do you have the time to comply with all that is required to sell your company?
- Do you have a forecasted amount of net profit you will receive from the sale? Knowing the amount you will net from the sale and/or the amount of time commitment required post-closing is an important part in deciding if this was a successful transaction.
If you are considering exiting your company in the next 36 months and interested in:
- Generating greater value than your stand-alone enterprise value;
- Taking chips off the table;
- Realizing greater walk away liquidity with far fewer fees than you would otherwise spend to exit on your own;
- Garnishing the upside benefits that private equity groups have experienced for decades;
- Participating in a middle market transaction; and
- Maintaining control of your company through the entire process until closing.
Then our Roll-Up Pool Program may be the solution for you.
To get started or learn more about us or the Sponsor Roll-Up Pool process:
If you are interested in learning more about your baseline business health and how your company compares with others in your industry, we offer an Assessment Report consisting of 33 survey questions and a summary of past financial data. Once we have reviewed your survey answers and run the analysis of your financial data, we will schedule a 90-minute call or meeting to share and discuss your assessment.