Two French radiology roll-ups. Same sector, same years, buying the same kind of clinic.

One bought at three times earnings.

The other paid five to six.

Guess which one is dead.

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The cheap one.

Its investors got zero. The lenders took a hundred percent of the equity, fired the management, and started selling the assets off.

The one that paid nearly double sold to Ardian in 2022 for north of €500 million, on about €100 million of revenue and over €30 million of EBITDA. Under three years from founding to exit. Their only institutional backer made ten times its money. Today, the founder says, it's the second-largest radiology network in Europe.

I heard this in a room in London, from the man who built it.

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I was at Rollup Europe's Serial Acquirer Summit in London. One hundred seats, one day, a room full of people who buy small companies for a living. I'll get to the rest of it.

But this was the story I flew home with.

The company is Simago. Started in 2019. The two founders were 31 and 32 when they sold it.

And the market they walked into explains why it was possible: France has about 5,500 radiologists, 37% of them over sixty, working in practices of two to twelve people. Fragmented, essential, and ageing out.

So two groups started buying.

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For a while it did. Genuinely.

They were buying centres at three times earnings while Simago was paying five or six. Bankers noticed. In his words, the competitor were "the new rock stars of radiology," and Simago looked outdated and overpriced.

Then they raised a second round showing about $20 million of pro forma profit, acquired at roughly two times.

Amazing company on paper. His phrase.

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Old radiologists.

They started retiring. That's retention gone.

And because the equipment was also old, the group couldn't attract new radiologists to replace them. That's recruitment gone.

So the profit fell. Not because anyone made a mistake after the deal, but because of what was bought in the first place.

Then they couldn't raise again. Then they broke their covenants. Then the lenders took the keys.

Here's the part that made the room go quiet.

Simago is now buying those assets. Cheaply. Because the new management is desperate and everybody knows it.

The discount the competitor chased at the start is the discount someone else collected at the end.

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Not better financials. The same clinics, roughly.

Equipment that wasn't at the end of its life. Radiologists who weren't about to retire. Locations that would still be good in ten years.

None of that shows up in a multiple. All of it decides whether the multiple means anything.

Cheap is not a win. Cheap is a symptom. Something about that asset made the price low, and your job before you sign is to find out what.

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Three questions. They cost nothing and they work on any business with people in it i.e. a clinic, a gym, an agency, a factory.

How old are your key people, and when does the oldest one retire? In a business where the staff are the product, their age is your revenue forecast.

When did you last replace the main equipment, and what does replacing it cost? Old kit doesn't just break. It stops you hiring.

Who have you hired in the last two years and could you hire them again today? If the answer is nobody, you're looking at a business in run-off wearing a business's clothes.

Then the actual discipline: when the price looks too good, write down what you think the discount is compensating you for. Put it in a sentence. If you can't finish the sentence, you haven't found it yet and somebody else already did, which is why it's cheap.

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A bootcamp, then the summit the next day, and coffees either side until my voice went.

I'd planned to stay with a friend. That fell through. Twice. London hotels were £200-250 a night, so I ended up in a hostel which was, and I say this with no irony, cleaner than most hotels I've paid four times that for.

What I actually went for was people, and that worked. Investors backing this model. Searchers a year or two in. Operators running platforms that didn't exist in 2020.

I pitched the thesis I've been circling for months: an Italian acquisition platform. More interest than I expected, from people with the cheques to act on it.

So I'm going to Italy.

That's the whole reason the trip was worth it. Not the sessions. The fact that I now have to go and do the thing I said out loud.

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What's the cheapest thing you've ever bought that turned out to be expensive? A car, a flat, a laptop, a business. What was the discount hiding?

Hit reply - I read everything.

Selling a business? [email protected] and tell me what it does and what it makes.

Want the Indian deals themselves rather than the reasoning? That's Kautilya's India Deal Sheet containing what's actually for sale, every week.

Further along, and want someone to find and buy one for you? Reply "Kautilya".

– Dev

P.S. - Three times earnings. The lenders own it. Six times earnings. Ten times the money back. The price was never the point.