Take Five #150: “The Next Billion-Dollar SMB Rollup: AI's Role in Industry Consolidation,” and more
Top five must-reads this week in the world of SMB acquisitions and operations
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Take Five #150: “The Next Billion-Dollar SMB Rollup: AI's Role in Industry Consolidation,” and more
1. “The Next Billion-Dollar SMB Rollup: AI's Role in Industry Consolidation”
The traditional rollup playbook—buy fragmented businesses, integrate operations, achieve economies of scale—is being fundamentally transformed by AI capabilities. As Henry Singleton, the legendary Teledyne CEO, once observed: "The essence of investment is the application of knowledge others don't possess." In 2024, that knowledge asymmetry increasingly comes from algorithmic advantage.
McKinsey's 2023 State of AI report reveals that companies implementing AI in post-merger integration reduce costs by 15-30% beyond traditional synergies, while accelerating full integration by an average of seven months. For search fund operators, this acceleration represents a critical advantage in the race against investor capital costs.
"The best businesses are built through patterns of decisions, not one-time home runs," notes Will Thorndike in The Outsider CEOs. AI excels precisely at pattern recognition across business operations that human operators might miss—creating a compounding effect with each acquisition.
Read the rest of Rishi Sharma’s post here.
2. Small deals might be where the opportunities are, especially for first-time searchers
3. No pressure, no progress in self-funded search
4. How to spot and handle real estate brokers taking on business deal negotiations
5. ETA Interview: How one business purchase accidentally led to a successful multi-industry HoldCo
Rafael Quinn, co-founder of Alternative Holdings, shares how he fell into building a holding company after buying his first business nearly 15 years ago. He discusses their approach to expanding beyond one industry, structuring the holding company, raising capital, and their investing criteria. He also offers insights on the importance of retaining previous owners and highlights his experiences acquiring restaurant and plumbing businesses.
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