A roll-up is a term used to describe a company that is built primarily though the acquisition of smaller companies with common services or products. Usually, roll-ups are conducted by financial buyers in a specific market that is fragmented and can be consolidated. The market may be dominated by one player, with the balance of the competition made up of smaller private companies without sufficient scale and infrastructure to challenge the dominant player.
The financial buyer will identify the potential acquisition targets that offer products or services within the fragmented market, and usually acquire them through a platform company. The roll-up then entails putting the various businesses together under a common brand, administrative infrastructure, reporting systems, and sales and marketing, so the combined business is presented to the customer base as a single entity. In a roll-up, value is created by building a much larger, scalable entity that will command a higher valuation multiple on exit, and also by establishing a common platform of systems and processes that allows for easy integration of each acquisition.
