# Why Rollups Deflate ## You can have decentralisation or integration, not both The book *Billion Dollar Lessons* has a chapter on deflated rollups. Its central finding, quoted approvingly by REQ: the architects assumed they could benefit from decentralisation **and** integration at once. They could choose either, not both (REQ, Jul 2025, p.34). The chapter's memorable image — **"buying a string of rock bands to form an orchestra."** It models beautifully in Excel and fails on contact with human beings. Three further failure patterns REQ says matched their own field observations: - Rollups required an **unsustainably fast rate** of acquisitions. - Rollups went for scale that wouldn't produce economies — sometimes producing *dis*economies. - Companies didn't allow for the tough times, and every rollup runs into tough times. > [!quote] Brent Beshore, CEO of Permanent Equity > If you're putting your head down and you're a founder-dominant organization with very little scale, with very little structure, how in the heck do you slam together two, three, four, five of these things and somehow standardize... You can produce a lot of EBITDA for a short period of time and then the wheels come off. ## The canonical case: B&B Tools In 2006, Bergman & Beving — a company with a century of successfully executing the decentralisation playbook — pursued a "One Company" approach: a decade-long centralisation plan to extract synergies from integrating product companies with wholesale and its many resellers. The efficiency gains looked great on paper and never materialised. It spun off Momentum Group in 2017, reverted to its original name, and has been on a cleanup mission since (p.34, p.117). The same period produced the leverage lesson — see [[Case Files - When Compounders Break]]. > [!tip] The laissez-faire trade > Cost efficiencies are *deliberately sacrificed* in the belief that ownership, autonomy and entrepreneurial spirit more than repay them. Nick Howley of TransDigm: "you have to pass up at times apparent cost savings on the belief that the loss of entrepreneurial spirit and ownership will more than overcome what you might save." ## Why it matters "Synergies" in an acquisitive company's investor deck is not a positive. In this model it is a tell — the thing REQ screens *against*. Route it to [[Red Flags in Serial Acquirers]]. ## Related - [[Acquisition-Driven Compounders MOC]] - [[Specialists and Generalists]] - [[Red Flags in Serial Acquirers]] - [[Case Files - When Compounders Break]]