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jerryking : roll_ups   12

The humbling of Valeant’s Michael Pearson - The Globe and Mail
TIM KILADZE
The humbling of Valeant’s Michael Pearson
SUBSCRIBERS ONLY
The Globe and Mail
Published Tuesday, Mar. 22, 2016

What we’re left with: A “Canadian” company we should happily disown, and critical reminders that certain business rules should never be broken. Chief among them: Debt is never a problem until, suddenly, it is; markets will love you until, suddenly, they don’t; and the roll-up game, driven by endless acquisitions, is nearly impossible to sustain.....By slashing R&D spending costs, Mr. Pearson freed up cash flow to buy more companies – whose R&D departments were then gutted to repeat the same trick. To juice earnings, he acquired Ottawa-based Biovail in 2010, which came with a Barbados-based subsidiary. Valeant started ushering U.S. profits to offshore tax domiciles – marking the first-ever pharmaceutical tax inversion and sending its corporate tax rate to the mid-single digits.

To fuel acquisitions, Mr. Pearson borrowed tens of billions of $ of incredibly cheap debt. By mid-2015, Valeant had $31-billion (U.S.) in debt and paid over $1-billion a year in interest.

There were warning signs these bold acts would backfire. Last March, Warren Buffett’s inner circle started to inflict damage. At an investor meeting, Charlie Munger, one of the value investor’s best friends, said he was “holding his nose” by looking at Valeant, adding that the company “wasn’t moral.”

That cautionary message did little to deter two of Valeant’s top investors: the Sequoia Fund – which has ties to Mr. Buffett – and Bill Ackman’s Pershing Square Capital Management. Whatever criticisms were hurled at the drug maker, they stood by it, repeatedly stressing that they believed in Mr. Pearson. Their faith in him seemed nearly biblical. And because they showed resolve, hedge funds kept piling in – momentum investing at its very worst. By the end of June, nearly 100 of them had stakes in the drug maker........One of the best lessons from the global financial crisis was that everything became correlated when the U.S. housing market crashed. The same is true for Valeant. Investigations into its pricing policy made investors worry about revenue; worries about the income statement morphed into fears about balance-sheet debt; leverage woes prevented Valeant from borrowing more to fund future acquisitions.

The cynicism turned investors’ momentum strategy on its head.
Valeant  Bay_Street  CEOs  pharmaceutical_industry  Charlie_Munger  Warren_Buffett  M&A  boards_&_directors_&_governance  correlations  hedge_funds  Pershing_Square  William_Ackman  debt  R&D  cash_flows  roll_ups 
march 2016 by jerryking
Got Growth? - Forbes
Lynn J. Cook
5/12/2003

While a gallon jug of white milk delivers single-digit gross margins, single-serve bottles of flavored milks and coffee drinks gross 45% to 55%. So Dean has been doing licensing deals with the likes of Hershey’s, Folgers and Land O’Lakes to market milkshakes to teenagers, mocha lattes to folks in their 20s and 30s and lactose-free milk to minorities (70% of Hispanics, 80% of African-Americans and 90% of Asians are lactose-intolerant)....Marketing, however, is not his forte. Engles is a market consolidator, spending most of the past decade eliminating his competition by buying it up.
soybeans  Dean_Foods  dairy  licensing  consolidation  food  growth  roll_ups  single-serve  high-margin  gross_margins  margins 
december 2013 by jerryking
At The Food Chains, It's All Gulp And Swallow -
May 07, 1995 | Businessweek | By Eric Schine in Los Angeles, with Leah Nathans Spiro in New York
deal-making  supermarkets  KKR  roll_ups  grocery  LBOs 
july 2012 by jerryking
Buy `Em Out, Then Build `Em Up -
May 07, 1995 | Businessweek |By Phillip L. Zweig in New York
LBOs  roll_ups  fragmentation 
july 2012 by jerryking
Opportunities for Entrepreneurs_Consolidating Fragmented Service Industries
Spring 1986 | New Management Vol. 3. Iss, 4; pg. 23. 5 pgs | Krauss, Carol Gibbons.

There are many opportunities for aspiring entrepreneurs to establish a successful business in the fragmented service industries. Reasons for fragmentation include: 1. the need for personal selling or delivery of a highly customized product, 2‘ local variations in environment or demand. and 3. inability to achieve economies of scale. Several possible strategies to overcome these fragmenting factors exist 1. Introduce a higher level of professionalism 2. Transform a service from a specialty into a commodity‘ 3. Separate portions of a mixed service and specialize in one aspect. 4. Change the delivery system by replacing some personal interaction with either automation or more customer participation To take advantage of these business opportunities. one must have a creative mind that is open to new organizational designs. The goal is to create a flexible formula that can be replicated
consolidation  entrepreneur  fragmentation  opportunities  personal_selling  small_business  start_ups  strategic_planning  economies_of_scale  fragmented_markets  roll_ups  professionalization 
july 2012 by jerryking
Venture Capital's New Adventure - WSJ.com
December 21, 2006 | WSJ | By PUI-WING TAM.

Usual Role of Nurturing Start-Ups Takes On a Private-Equity Twist; Mr. Lanza Becomes a Deal Maker...."I suddenly became aware that we were triggering a rollup in the sector and my phone was ringing off the hook," says Mr. Lanza, 50 years old. "It was very surreal. I'm used to wandering the halls of Stanford to fund companies founded by two guys and a dog."

Like Mr. Lanza, other venture capitalists have broadened their roles beyond investing in and nurturing start-up businesses. They more often find themselves handling spinouts -- or buying units of publicly traded companies -- as well as so-called rollups and buyouts, and generally engaging in more-complex financial transactions.

In other words, they have stepped into the realm of private equity, now one of the finance world's hottest arenas. The change could make investing in venture-capital funds more risky.
venture_capital  vc  private_equity  Intel  deal-making  spin-offs  spinups  roll_ups  buyouts  Pui-Wing_Tam  carve_outs 
april 2012 by jerryking
ABC's 'Mr. Inside' Daniel Burke 1929-2011
OCTOBER 27, 2011 | WSJ | By STEPHEN MILLER.

Daniel Burke was the "Mr. Inside" management specialist in the merger of American Broadcasting Cos. with Capital Cities Communications, one of the signal deals of the 1980s and the first of the mergers that swept the "big three" television networks...A native of Albany, N.Y., Mr. Burke fought in the Korean War and attended Harvard Business School. He worked initially at the Jell-O division of General Foods before going to work for Mr. Murphy at what became Capital Cities, in 1961.

Mr. Burke's first job was to manage an Albany television station housed in a run down 19th-century former retirement home for nuns. As he climbed the ranks he developed a reputation as a cost cutter, and was in charge of melding Mr. Murphy's acquisitions into the growing Capital Cities empire.
ABC  obituaries  television  roll_ups  cost-cutting  HBS 
october 2011 by jerryking
A Middleman Who Doesn't Feel Squeezed by China
September 15, 2005 | New York Times |By JAMES FLANIGAN

Henry Fan expects growth from acquiring distressed apparel firms and gaining the size and strength to withstand the risks of supplying big retail companies even at the low prices that Chinese imports are dictating....Fan says he believes he can continue to compete by using the expertise he gained in the worlds of technology and finance to build an international supply network to handle the growing trade.

"We have overseas offices in Hong Kong and in many parts of China as well as Bangladesh and Thailand," he said. "We can design products here or overseas and ship them anywhere; we can tackle the job in numerous ways." In short, he wants to make Basic Elements a central part of the new supply equation of Chinese factories and American retailers.
intermediaries  Chinese  China  apparel  competitive_advantage  strategy  supply_chains  middlemen  economic_clout  Hong_Kong  Bangladesh  Thailand  roll_ups 
october 2011 by jerryking
Magic Johnson, Yucaipa Invest in Vibe - WSJ.com
FEBRUARY 10, 2011 | WSJ | By RUSSELL ADAMS. Magic Johnson, Yucaipa Invest in Vibe.
African-Americans  private_equity  Magic_Johnson  Ron_Burkle  Vibe  roll_ups  consolidation  media 
february 2011 by jerryking
Seven Ways to Fail Big
September 2008 | Harvard Business Review | by Paul B. Caroll
and Chunka Mui.
(1) The Synergy Mirage (2) Faulty Financial Engineering (3) Stubbornly
Staying the Course (4) Pseudo-Adjacencies (5) Bets on the Wrong
Technology (6) Rushing to Consolidate (7) Roll-Ups of Almost Any Kind.
Avoiding Disasters: The Devil's Advocate.
See also "Questions Every Company Should Ask" at the end of article.
HBR  magazines  overoptimism  synergies  failure  devil’s_advocates  roll_ups  decision_making  thinking_big  strategic_bets  taxonomy  financial_engineering  questions  red_teams 
may 2009 by jerryking

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