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Roland Frazier
It is each of those things depending on the deal, right? And we'll see those happen. The thing that was interesting was when I was in Austin a month or two ago at the JP Morgan Chase Middle Market Meetup or whatever it was, where, where they basically matched us, you know, they had 42 family offices and private equity funds and 42 companies. And we speed dated and talked to a bunch of them. Hey everybody. Welcome to another episode of Business Lunch with me, Roland Frazier, your host and co host, Ryan Dice. Ryan, what's happening?
Ryan Dice
I have a new business proposition for you. Do you want to hear about it?
Roland Frazier
Fantastic. No, I'm in.
Ryan Dice
It's the next. It's the next big thing. No, seriously. I was reading this article and I want to get your, I want to get your take on it. I think that this is right up your alley. It combines the two things that I think you love more than anything else.
Roland Frazier
Dogs and synthesizers.
Ryan Dice
Wine. Yeah, dogs, wine and synthesizers. Now, AI and roll ups. I'm sure you, I'm sure you've seen this, but this, this seems to be kind of the next big thing. So there's obviously all these people out there, all these companies, all these startups looking to build the next unicorn AI app. But there's also a number of businesses that are taking the track of, you know, screw all that. And what they're doing is they're saying, let's go and roll up a bunch of old school businesses and inject AI in them and then use that to add value. So you're familiar with Constellation Software and how they just went and bought a bunch of old software companies, kind of lumped them together. So that's kind of what these businesses are doing. So for example, I was looking at it, Crete is one of them. They're doing an accounting roll up and they're doing AI integration with that. Another one is Long Lake Management. I thought this was pretty cool. They're rolling up a bunch of hoa. So you know, all the, like neighborhood management, so all the HOA management companies and they're with the goal of then AI find those and then Harvey Capital, they're doing legal tech and then find those. So roll ups, nothing new. Also the idea of rolling up a bunch of companies to then and then adding some kind of tech layer, this has been done, but it's also been done and it's failed spectacularly. You know, we saw this with people who wanted to roll up a bunch of legacy retail brands and bring them into Amazon, you know, or E Commerce ify them. And Boy, did that flop. What was it like? Thrasio or whatever was one of the big E Com rollups and it just crashed and burned. So what do you think about the strategy and just kind of rough the bat and do you think it's more of a Thrasio thing that's going to crash and burn? Do you think it's more of a Constellation software and this is the next multi hundred billion dollar opportunity?
Roland Frazier
Ever wondered how some people build real.
Unknown
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Roland Frazier
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Unknown
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Roland Frazier
So you always have high quality off market deals coming to you.
Unknown
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Roland Frazier
Out of your own pocket.
Unknown
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Roland Frazier
Doing deals with right now. I'll see you there. Yeah, I mean I.
Ryan Dice
And there is no in between by the way.
Roland Frazier
It's, it's. Yeah, it, it is each of those things depending on the deal. Right. And, and we'll see those happen. The thing that was interesting was when I was in Austin a month or two ago at the JP Morgan Chase Middle Market meetup or whatever it was where, where they basically matched us, you know, they had 42, 40 family offices and private equity funds and 42 companies. And we speed dated and talked to a bunch of them. All of them have this model that they're either buying up that you know, they're buying a platform company that they can use to do other acquisitions and then they want to know what do you have in terms of tech enablement and AI. Because if you have it, then they want to spread it to the companies that don't that they're going to use. Your company is a platform to acquire and if you don't have it then they have a bench of people that they're going to bring in that will provide it so that there's a bump in value for your company. So it's like it's a. It's absolutely all the rage. And, and I think it makes sense and I agree with you. It's nothing different than has ever happened before like roll ups really if you think of the heart of the rollup is we can achieve economies of scale by and what they call merger synergies by bringing together these companies. So if you own a H Vac company and you've got six trucks, if you can acquire seven other H Vac companies, maybe you can share trucks, maybe you can optimize the routes. Maybe you will. For sure you only need one back office so you don't need eight CEOs and eight CMOs and all that kind of stuff. So you can be significantly more efficient. And then you can take the best of breed technology that each of those has, the best of breed SOP Standard operating procedures, the best of breed customer service, the best of breed offerings, the best of breed ads and lead gen and everything else and smash them together and make this superior Frankenstein company that is going to outperform everybody else in theory. But stats say merger synergies typically fail 80% of the time.
Unknown
Now I believe that part of the.
Roland Frazier
Reason that that rate is so high is culture. A failure to look at culture fit among the companies that are being acquired early on. I think it's overzealousness by investment bankers Pushing companies to acquire maybe things that don't quite fit without really taking a look at it. But when it does work, it's amazing. So like the basic building blocks of why you would do a roll up applied with AI and tech make perfect sense to me. So I think it's, I think you will have the same result though, that 80% of them won't work out like they hoped and that it will be because of all the reasons that we just talked about. But the ones that, that do it right, that do it carefully, that are very selective in the companies that they're acquiring or the way in which they're aifiying and techifying will make all the difference.
Ryan Dice
Okay, so I'm thinking that there's probably three different groups that could be listening to this right now and I'd love to kind of talk through how each of them should respond. So let's say there's the old school business that isn't yet AI ified. There's the old school business that is presently like they're, they're adopting the new technology already and so they're thinking that maybe they could be that platform play. And then you've just got the investor, the person who, they don't, they're not operating any business and so they, they're thinking about this as a particular strategy. If we were to start from the kind of the old school business, what would be your advice to them? Should they seek to AI themselves or should they look to just get acquired by some, you know, already AI fied business and just kind of throw in the towel and say, you know, I don't, I don't want to do that.
Roland Frazier
I think it depends on your appetite for change and, and growth that, that like if you are old school mentality and you're like, I've had this business for a long time and I do things the way I do it and I'm kind of threatened to buy this other thing, but I'm not excited about it or hungry for it and I just assume it didn't exist and hopefully it's a fad and it goes away. Then I'm not sure an acquisition or doing it yourself makes sense. I think that you thinking about selling to a company that can increase the value makes, makes more sense. You know, I think that because I, because it takes curiosity and hunger to make that work. If you're old school, sitting comfortably now, making good profits, what's the motivation? Right? But if you are, if you're into it and you like the technology and you embrace it and you're comfortable with change and you're ready to shake things up in your company and, and you realize that you can actually make significant advances in how well you operate and how your customers experience you, then I think it would make sense for you to think about being the acquirer or the person that hires the people that can make the change happen that you want to happen. Does that make sense?
Ryan Dice
Yeah. No, it does. I'm trying to think of what I would say to somebody if they came to me and they're like, you know, what do you think? You know, do I, do I need to, do I need to make this pivot in my business? Do I need to get with the times or can I just write it out? And I was thinking it would probably depend really on their age and timeline. I would say if I'm talking to somebody in there, you know, who's in their, let's say 70s and they're, they're planning on, and this could happen at any age. But I'm just saying, hypothetically speaking, and they're like, I'm really only going to be running this thing for the next four or five years and, and then I'm kind of just going to let it sunset and I too am going to retire.
Roland Frazier
Yeah.
Ryan Dice
Then I'd probably say, you know, you can just keep doing what you're doing and let your business die a slow and profitable death. Yeah, that's kind of what you're planning to do anyway. And now it'll happen on its own and you'll have the clients you have that are loyal and they'll stay loyal and that's fine. But if you're like planning on giving this thing another 10 years or if you do plan on selling it, I kind of feel like you've got no choice but to get with the times. And it seems to me like if you don't invest in up leveling and AI, find your business now, then if you do get acquired and if you're one of these businesses, I mean the reason that these roll ups are so excited to buy all these old school companies and then AI5 is because they're getting a deal.
Roland Frazier
Yeah.
Ryan Dice
Right. They're paying below what they perceive as market so that they can scoop them up on the cheap, inject AI and then boom, they're instantly worth more. So I don't think you want to be the company that's being acquired cheaply.
Roland Frazier
Yeah. So not unless you are keeping a significant retained interest to roll over into the new deal and then Basically letting them do the work. And so the premium that you're paying to have an experienced team that's going to run the playbook of AI and acquisitions to grow is the premium to get that team is basically the discount you take on the sale of your company. And that's not bad either. I mean, if you sold 60 or 70% of your company and, and had a retained, a retained interest of the balance and then an experienced, well funded private equity firm comes in and builds it up and brings the talent and aifies it and 6x's sales, your 40% that you kept now is worth 2.4 times what you sold the company for in the first place. You're doing okay, right? And you didn't really have to do that much. So that, that's not a bad play there. But, but man, that timeline is rough because it could be three years and like three years with a big cliff and, and you might find yourself, you know, in a fire sale situation because you aren't really like, you're like, if you're experiencing declining sales and revenues, your sale price is going to be hammered because of that. And, and then you will be bought on the cheap. And you know, so it's, I think it's like if you're planning on just shutting it down or letting it die a slow and profitable death, then cool. And your horizon, I would say is three years or less. But if it's longer than that, you either have to get on the bus one way or the other or face being put out of business. I think, I think it's truly the correct use of the word existential and that you will literally, literally go out of business.
Ryan Dice
Yeah, literally. It's literally existential. Both of those words being used appropriately for a change. All right, so let's say I'm the business who I'm all in. And I'm reading about this, I'm seeing these AI roll ups and I'm thinking I can do that. You know, I don't need, I'm not one of these investors. I've already got the business. I think I can be the platform company. You know, I am this accounting company or you know, I have one of these HOA management companies. I want to be the one who goes around and buys them up. What, what do I need to have in place? Because we get this all the time, right? Let's, let's be honest. People come to us and they're like, hey Ryan. Hey Roland, I want to do a roll up. I've got a business Help me do a roll up and, or better yet.
Roland Frazier
I don't own any business yet. I'm like, well then number one, you must acquire one business, right?
Ryan Dice
So let's say they got a business, it's operating and they're operating it. They got, they got a decent, they got a decent business. But what would you say a company needs to have if they themselves want to be roll up ready?
Roland Frazier
I mean, I think it's cultural to start because I do really believe that if you're not into this and you're not comfortable that things are going to get shaken up, it's not going to work well, you're going to be fighting it and you're not going to be happy. So I think you have to be open to rethinking how things are done. And then I don't really like the idea of acquiring a company that's already done it unless you can get a deal on it. Because I feel like everything that gets AI right now is priced to the moon and it just doesn't make sense. And you'd be way better off getting a team that does AI transformations to come in and do it if you were like a large company, but if you're, you know, a small, medium sized business that might be unnecessarily expensive and questionably effective. So I think it's a jobs to be done kind of approach where you say, you know, what are the things that we do right now that we feel could be done more efficiently and more profitably and faster and providing a better customer experience and you make that big list and then you're going to say, okay, what are these things do we think are the biggest priorities that will have? You know, that's an ICE analysis. Impact, confidence and ease. What, what will have the biggest impact? That we have the most confidence with the greatest amount of ease. And then you've got those ranked and now you've got your jobs to be done. Okay, what are my jobs to be done to make that happen and then have someone start on that one thing and then just start knocking them off. And we've been doing this across a lot of the companies that, that we own together. And I think it's been pretty effective. It's not been like this all at once wave of change which is very disruptive to everyone and has all kinds of stuff that goes wrong. It's been, you know, where can we have the biggest impact? The fastest, the most certainly right now, and then let's do that and then we move to the next thing and the next, and the next. What are your thoughts on it?
Ryan Dice
Yeah, I completely agree with that. So I'm saying like we've got a business that they've already done that. So they've got a business, they've AI5 themselves and now they're thinking they want to be that platform and they want to start rolling up.
Roland Frazier
Yeah.
Ryan Dice
What other things do you think they need to have in place from a management perspective, from revenue, from a profitability for them to feel comfortable to go and start doing these acquisitions and be, be a platform in the roll up?
Roland Frazier
I don't, I don't think revenue and profitability are nearly as important as management and systems. I think like roll ups fail at the integration level and the integration is, you know, bringing the companies together to operate as one. And that's really what systems do. We have to do that. And then in your diligence, you're looking at the company and saying, does it have management strengths that we don't have? Does it have management philosophies and a culture in the business that complements ours? Are they on the same back office systems as ours or are those systems easily migrated to what we're using? Because that's a big hassle. And if you've got the systems and the team that has the ability to do that, and preferably a team that has actually done integrations or acquisitions before, then that's going to make a big difference. And if you don't, then I think you probably want someone who does have that experience as a consultant on board to advise you to help make it happen. Because it's like a blended family. If somebody with kids meet somebody with kids and they want to get together and build one family out of that, there's integration issues. And it's the same thing that's happening in that company. So that to me, that's the single most important thing.
Ryan Dice
Yeah, and that's, and that's, that's great because so many people think that just because they have a business and just because they have a profitable business that they can now go and just start doing acquisitions. What they don't realize and in many cases, and they've got solid systems, but the systems are only as good as the people running it. And if your business really is taxed and if you have, if the people who are, who are running that business at that executive leadership level has never led at the next level and now you're going to ascend to the next level inorganically, so they don't even have time to grow which usually, even if they do have time to grow, they're not going to. They're going to fail. Right, right. You rarely see people actually growing to the next level, and now you're going to force them to go to the next level all at once, because you're doing it through acquisition. Yeah, it's tough. It's tough. So, yeah, you got to make sure. And so now think, now let's take on the investor. So somebody's listening to this, and they're like, love the strategy. I'm going to go out there, I'm going to. I'm going to execute on this myself. What would be the first thing that they should do? And let's say they don't have a ton of capital to throw at it. Would you. Would it be to buy, to look, to partner with or to acquire one of those businesses that has excellent management team?
Roland Frazier
Yeah, that could be done as a merger. That's more than an acquisition. It's kind of bringing together two roughly equal companies that have roughly equal contributions into one and then using the strengths of each to supplement the weaknesses of the other. So it might be more of a merger situation, if that's kind of where you were sitting. But, like, the capital isn't, to me, nearly as important because there's so much capital that's out there that's available to Access, whether it's SBA funding, you know, up to 5 million bucks is relatively easy to get your hands on if you're, you know, if you're an existing company that's profitable and you're looking to do something else. There's all kinds of funding sources. You can go to private equity if you're looking for, like, you know, our mutual friend Wayne with the printing company talked to me last night, and he's got a competitor that is significantly larger, and this is an acquisition that'll be, you know, mid eight figures. And he's like, well, I don't have it. And, like, you don't need it. You know, we can. It's. It's past SBA, because it's more than 5 million that it's going to take to do it. But that company is profitable, and your company is profitable. So if. If you get the answers to this. These questions that I gave them, you talk to them and find out the answers to these questions.
Ryan Dice
And.
Roland Frazier
And if that's all the case, then, well, let's take a run at it.
Ryan Dice
Right.
Roland Frazier
Because I know the funding is there. There's. There's plenty of money that's out there for a good deal. And if the deal will carry the payments on the funding, then that's not a problem. So I'm not really concerned about that. And then, as you know, you know, we have hundreds, literally, again, literally correctly used, hundreds of ways that you can fund businesses to stack a deal, you know, financing plan without having to have a bunch of capital. So that doesn't concern me nearly as much as what we already talked about.
Ryan Dice
Yeah, I don't know, I just thought I wanted to chat about it just because the anytime. I know you love acquisitions. We love acquisitions here. And one of the best things about acquisitions is not just bringing in talent, bringing in media, all the assets that come with it, but the ability to add value.
Roland Frazier
Yeah.
Ryan Dice
To those assets when you bring it in. And AI is the ultimate value add if the business that you're acquiring doesn't have it. So when I saw this, I was like, yes, this is pretty cool.
Roland Frazier
Think about what it can do. Like, think about if we can automate front the front end of sales. Like if we've got a sales team and we've got 100 sales development reps and we can effectively eliminate that because we can do appointment setting, qualification, lead scoring, all using AI and then have our salespeople talking in order of ranking only to the people most likely to close and buy the thing that we have to sell, that's huge. If we can automate, you know, the front end of customer support and reduce customer inquiries by 70% that need to be handled by a live human and get the customer the information they want 24, 7 as they need it, as opposed to when we have people in the office. Like, those are giant things that exist. If we can not have hundreds of people taking data that gets uploaded to portals that then has to be transferred to other software to use it and provide the service. If we can, you know, route our people more efficiently to go on routes to do services for home services without, you know, without having to have human people involved. I mean, like all of that stuff, it's, you know, it is not dehumanizing like dehumanizing, but is dehumanifying. It's reducing the head count. Like that's straight to the bottom line profit. With superior service and significantly lower interruptions, it would only be like a tech outage, not somebody's called in sick or has a doctor's appointment or doesn't feel good. I mean, like it's, it's insanely value adding to put that stuff in. So like when we look at our three things to increase the value, you know, to, to really hit scalability. And we say leverage sales, bankable profits and transferable value. All of those are affected by AI. So I think buying non or minimally AI fied companies and then taking them up to a standard that you've got is a great playbook that's going to work well for a whole lot of people and definitely one that we are using, you know, together now in our businesses.
Ryan Dice
Yeah, there you go.
Roland Frazier
All right, so there you have it. If you guys have any thoughts about.
Unknown
This, if you have questions, doubts, concerns or input or case studies or stories.
Roland Frazier
That you would like to share with us about how this is working with you, we would love to hear it. Hit us up on the socials. And if you enjoyed this, please share it with a friend or somebody you don't even like, but you want to help them out. And we will see you next time on Business Lunch.
Unknown
Hey, Roland Frazier here. If you're looking for a way to grow your business exponentially to get more customers and ultimately increase your wealth, there's no faster way to do it than to acquire other businesses that already have the customers, products, services, teams and media that you want. If you want to double your sales, just acquire a company that has the same sales as yours. It sounds simple, but far too many people end up starting new businesses that fail and forget that they could skip all the hard stuff and just acquire one that already exists. There's a reason why private equity firms, family offices, big companies like Apple, Google, and some of the smartest entrepreneurs on the planet do not start new businesses from scratch. They acquire already successful businesses and when they do it, they instantly increase their sales, their profits. If they want market share, they increase that they can get new products and services to offer, all instantly. Hey, look, 90% of new businesses fail. 90%. Why not acquire an already successful business and increase your chances of success by 900%? What most people don't realize is you can acquire highly profitable businesses with no money out of your own pocket in pretty much any country in the world, regardless of your credit and without having to go find a bunch of investors or needing any experience. Look, I've been acquiring businesses but for over 30 years now, and I cover the whole process in my EPIC Investing strategy training. And I want to give it to you 100% free. Just visit businesslunchpodcast.com epic to get your free access to my EPIC investing training right now while it's available.
Business Lunch Podcast Summary
Episode: Merging Old-School with AI: Strategies for Success
Host: Roland Frasier
Co-Host: Ryan Dice
Release Date: August 5, 2025
In this insightful episode of Business Lunch, host Roland Frasier and co-host Ryan Dice delve deep into the evolving landscape of business acquisitions, particularly focusing on the integration of Artificial Intelligence (AI) into traditional business models. The conversation navigates the complexities of merging old-school businesses with AI-driven strategies, evaluating the potential for success and the pitfalls to avoid.
The episode opens with Ryan Dice presenting an intriguing business proposition that intertwines AI with the traditional rollup strategy. He discusses the emerging trend where businesses acquire established companies and integrate AI to enhance their value, contrasting this approach with the more common strategy of building new AI applications from scratch.
Ryan Dice [00:44]:
"AI and roll-ups. I'm sure you've seen this, but this seems to be kind of the next big thing."
He cites examples such as Crete’s accounting roll-up and Long Lake Management’s HOA management consolidation, highlighting how these companies aim to leverage AI to optimize operations and scale efficiently.
Roland Frasier weighs in on the viability of the AI-enhanced rollup strategy by comparing it to previous attempts in the market. He references the success of Constellation Software, which effectively amalgamated various old software companies, versus the downfall of Thrasio, a major player in e-commerce rollups that ultimately failed.
Roland Frasier [03:22]:
"Merger synergies typically fail 80% of the time."
He emphasizes that while the foundational idea of rollups—achieving economies of scale through mergers—is sound, the actual execution often falters due to cultural mismatches and poor integration strategies.
Ryan Dice segments the audience into three distinct groups: traditional businesses not yet AI-integrated, businesses in the process of adopting AI, and potential investors considering this strategy.
Ryan Dice [09:41]:
"If you're old school and planning on giving this thing another 10 years or if you do plan on selling it, you've got no choice but to get with the times."
For traditional businesses, the recommendation hinges on their willingness to embrace change. Roland suggests that companies resistant to AI should consider selling to AI-savvy entities to preserve value, while those open to technological advancements can either integrate AI themselves or position themselves as potential acquirers.
When addressing businesses aiming to become rollup-ready, Roland underscores the importance of management strength and robust systems over mere revenue and profitability.
Roland Frasier [18:13]:
"It's really about the systems and the team that has the ability to integrate acquired companies effectively."
He advises focusing on cultural compatibility, management philosophies, and the ease of migrating back-office systems. Establishing a solid foundation ensures smoother integrations and enhances the likelihood of successful mergers.
The conversation shifts to the tangible benefits AI brings to acquired businesses. Roland highlights several areas where AI can significantly improve efficiency and profitability.
Roland Frasier [23:03]:
"If we can automate the front end of sales, eliminate redundant tasks, and provide superior customer service, that's insanely value-adding."
Key applications include automating sales processes, enhancing customer support with AI-driven solutions, and optimizing operational logistics. These integrations not only reduce costs but also improve service quality, positioning the merged entity for greater market competitiveness.
For investors keen on executing the AI rollup strategy but constrained by capital, Roland provides pragmatic advice. He emphasizes that access to funding is generally achievable through various sources, including SBA loans and private equity, especially for profitable businesses.
Roland Frasier [20:47]:
"There's so much capital out there that's available to access, whether it's SBA funding or private equity."
He encourages investors to focus on finding profitable targets and leveraging creative financing methods to structure deals without heavy upfront capital, thereby mitigating financial risks.
Roland stresses that the success of AI-enhanced rollups largely depends on the integration process. He compares it to blending families, where understanding and aligning cultural values is paramount.
Roland Frasier [19:28]:
"Integration is like bringing together a blended family; it's all about cultural fit and shared systems."
Effective integration involves meticulous due diligence, ensuring that the acquired company’s systems and cultures align with the acquiring entity. This careful approach significantly reduces the failure rate of merger synergies.
Concluding the episode, Roland and Ryan reiterate the transformative potential of merging traditional businesses with AI. They acknowledge the high failure rate but remain optimistic about the substantial rewards for those who execute the strategy with precision and cultural sensitivity.
Ryan Dice [25:26]:
"One of the best things about acquisitions is the ability to add value, and AI is the ultimate value add."
They encourage listeners to consider this strategy as a viable pathway to scaling businesses, provided they are prepared to navigate the associated challenges thoughtfully.
Conclusion
This episode of Business Lunch offers a comprehensive exploration of the intersection between traditional business rollups and modern AI integration. Through a candid discussion, Roland Frasier and Ryan Dice provide valuable insights into the strategic considerations, potential benefits, and inherent risks of adopting this approach. For entrepreneurs and investors alike, the episode serves as a vital guide to understanding how AI can be leveraged to enhance acquisitions and drive sustained business success.