Consolidation Strategies

Consolidation Partners provides advisory services to platform companies seeking to roll up or consolidate multiple companies in a fragmented industry. The unique offering of CP is the Partnership Roll-Up™ (PRU) model that a CP principal employed in a highly successful roll-up that combined 16 companies over time into a $1.0+ billion national business that now leads its industry. The principals at CP are seasoned professionals that have been integrally involved as owner/operators in rolling up fragmented industries.

The PRU delivers economic benefit to roll-up companies where traditional strategies don't

Traditional roll-up transactions involve the acquisition of one or more companies at a single time or sequentially over time with the economic benefits of the roll-up retained by the acquiring company or investment group. The Partnership Roll-up™ model employs a proven strategy of retaining the economic benefits for the owner/entrepreneur while providing many additional benefits.

No capital is required to undertake the roll-up strategy.
Participating roll-up companies remain independent until the time of the consolidation, which may be 1-2 years, allowing the company to maximize its financial performance before the consolidation event.
Management can improve the value of their individual entities while independent by combining resources to effectuate better purchasing, implement benchmarking among roll-up partners to enhance financial performance, and working together to pursue broader client relationships.
Critical mass from the roll-up group of companies provides the ability to start or acquire ancillary operations and expand the breadth of services offered by the group; a strategy that generally cannot be accomplished from the balance sheet of a single company.
Once consolidated with greater critical mass, EBITDA will be significantly increased and the company will receive a higher valuation multiple than a smaller, local or regional company, thus substantially increasing the value of the individual company.

Sponsor Services

The consolidation services provided by CP consist of helping a “platform company” to assemble an initial group of members ("Pre-Alignment") and all three phases through the process of the Partnership Roll-up™, including: "Alignment", "Consolidation", and "Liquidation". Due to the long-term nature of the anticipated engagement, clients of Consolidation Partners execute a retainer agreement outlining the roles, responsibilities and compensation that CP will undertake and earn on behalf of the roll-up group.

Pre-Alignment

Work with the platform company to initiate the partnership formation

Free preliminary consultation on the merits of a roll-up and strengths of the platform company.
Support the process of identifying prospective member companies
Prepare presentation documents for use in approaching prospective member companies
Assist in “all hands” meetings among prospective member companies
Provide legal counsel and requisite documentation to facilitate the formation of a new entity (Newco) to facilitate the roll up
Establish Newco and begin operational alignment

Note: All formation costs (legal, meeting, etc.) will be reimbursed by Newco at the time of formation through pro rata capital contributions of the partners.

Phase 1: Alignment

Facilitate the alignment of key business processes and create a post consolidation plan of integration

Meet independently with all members to develop a SWOT analysis for each company
Set up web based diligence site for posting of key documents
Establish and initially lead committees/task forces, identify key personnel, set timelines and guidelines
Work with staff to identify revenue opportunities and cost sharing through Newco
Establish the team of professionals to facilitate the consolidation (CPA, Tax, Legal, Compensation)
Support in resolving key ownership and related party issues
Develop a post consolidation plan of integration for all operating areas with specific financial targets
Introduce prospective equity investors to allow monitoring to insure future interest on a preferred basis

Phase 2: Consolidation

Effectuate the consolidation (merger) and pursue operational improvements.

Approach debt and/or equity markets to provide the requisite funding to facilitate the merger transaction
Close the consolidating transaction
Provide accountability to achieve goals per the plan of integration:

• Work closely with management to insure task forces are performing per plan
• Timelines, operational plans, and expected savings need to be closely monitored
• Work with the Board to insure savings are achieved and EBITDA is closely monitored
Work with the board to evaluate Liquidity options and timing.

Phase 3: Liquidity

At the direction and timing of the Board, pursue appropriate liquidity options

Advantage: A Case Study of the PRU™

In 2004 the first Partnership Roll-up™ transaction was completed by Advantage Sales and Marketing (www.asmnet.com), a food brokerage company that rolled up the fragmented food broker industry. The model used by ASM was the Partnership Roll-up™, whereby ASM created a new LLC and tier one food brokers became partners under the LLC, positioning them overnight as regional; after more than 30 food brokers joined ASM, the group was able to offer a national solution to their clients. During the initial years, ASM member companies began to align their operations so that each member operated similarly in key functions such as Sales, Marketing, HR, IT, Finance, and Accounting, including audits. Each member benefited during this phase through the implementation of best practices, benchmarking, and consolidated purchasing. Further, new “bolt on” businesses were established, funded by the members of ASM, diversifying the ASM platform and providing significant incremental value.

“Creating Value For the Entreprenuer”