Roll-up business models usually fail in two ways. In the first way, the acquired assets don’t produce a high enough return to justify the cost of acquisition, even when factoring scale advantages. In this case, the cash flows produced from the acquired assets less the payments on the new debt are only slightly positive or even negative. Management teams of these roll-up models think that bigger is better, regardless of the quality of the revenues.
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AGB 2020.4 - TransDigm Group (TDG)
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Roll-up business models usually fail in two ways. In the first way, the acquired assets don’t produce a high enough return to justify the cost of acquisition, even when factoring scale advantages. In this case, the cash flows produced from the acquired assets less the payments on the new debt are only slightly positive or even negative. Management teams of these roll-up models think that bigger is better, regardless of the quality of the revenues.