Going Public in a Rollup

In 1996, Troy L. Fraser was running the company his father started in their backyard while Troy was still a teenager, and he was running it well. Fraser Industries Inc. of Big Spring, Texas, posted $50 million in revenues that year. The company, which makes and recycles pallets—the wooden platforms used to ship heavy machinery and supplies—was a market leader in the Southwestern United States. It was at the end of a three-year growth spurt during which it had opened nine new plants.

Growing much larger wouldn't be easy, however, because the pallet industry is highly fragmented and controlled by regional companies generally smaller than Fraser. To achieve significant new growth, the company would have to break out of its region—a move that could cost a lot of money before ever returning a dime. And Fraser was much too small to consider a serious public stock offering to raise capital.

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