Characteristics of a consolidating industry
There may well be more companies created in an industry to take advantage of opportunity in that industry (creating a cycle of build/sell/consolidate/repeat), but given the patterns in this simple analysis those concerns may not be meaningful.
All investors would be wise to monitor deal activity in this way to avoid being caught in a bubble and overpaying.
A recent rollup is Valeant Pharmaceuticals International that used more than billion to acquire over 100 companies.
Ever tried to figure out what industries are consolidating?
Investment managers and investment bankers alike have a lot to gain from accurate timing of industry consolidation.
Deal advisors perhaps less so, because as we’ve already seen, deals are driven by people as often as economic forces.
Lucky for us, with the content available on Fact Set we can get a much better idea with some relatively simple queries across Fact Set M&A and Fact Set Entity Data Management Solutions (DMS).
The principal aim of a rollup is to reduce costs through economies of scale.Currently, Regional Banks are feeling pressure and joining forces, and Contract Drilling is on the rise, likely from the recent fracking boom.Further dividing the data by country or region may help highlight more specifics by location.Waste Management's acquisition of 133 small-time haulers quickly became the largest waste disposal company in the US.The characteristics that can make a rollup attractive are: there are many small players in fragmented markets or: where technology can play a role in revitalizing industries with small margins but technology can impact growth and profits.