What takeovers of fund managers tell you about markets

MARTIN AMIS, a novelist, was once asked why he preferred roll-ups to ready-made cigarettes. “It’s simply the best burn available,” he replied. In finance, a roll-up is a strategy of buying lots of small companies in the same industry and combining them into a big one. A big firm can cut costs by reaping economies of scale—in marketing or IT, say, or in negotiations with suppliers. The markets are attracted to the glow. They often assign big companies a higher valuation than small ones.