Roll-up

Many industries — trades, professional services, healthcare clinics — are fragmented into hundreds of small, independently owned businesses with no clear market leader. A roll-up bets that combining a number of them creates something worth more per dollar of earnings than the sum of the parts, because scale brings buying power, shared overhead and often a bigger buyer at exit.

How a roll-up is typically built

• A platform acquisition establishes the initial base — management, systems, brand — the strategy will build on
• Add-on acquisitions are folded into the platform over time, usually at a lower multiple than the eventual combined exit
• Back-office functions — accounting, HR, purchasing — are often centralized to cut duplicated cost across the combined businesses

What it means for an owner selling into one

An owner selling into a roll-up is often selling to a buyer that plans to keep the business’s brand, staff and local relationships mostly intact, at least initially, while integrating back-office functions behind the scenes. Consolidation risk sits with the buyer, but it is still worth understanding before agreeing to an earn-out or rollover equity tied to the combined entity’s future performance.