I'm doing work on Ensign (skilled nursing operator) which recently announced it's going to be spinning off its home and hospice services business & senior living businesses into a new company called the Pennant Group.
Ensign and Pennant have both used the roll up strategy. Both companies operate in a fragmented market so the strategy seems to make sense and Ensign has been very good stock.
My question doesn't really relate to Ensign but more so to the roll up strategy. If executed successfully, it is a compelling strategy (Constellation Software, Jarden, Waste Management, and AutoNation). However, there are the obvious disasters like Valeant. Nuance is another company that has made numerous acquisitions for years and it's stock price has done nothing. Any others that come to mind?
My question is this. Ex ante, what are the tell tale signs of good roll ups? What are the tell tale signs of bad roll ups?
I saw the below thread, but it is more focused on valuing a roll up as opposed to separating "good" roll-ups from the "bad"
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/how-to-value-roll-up-companies/
Thanks in advance.
