Roll-Up

A roll-up is a consolidation strategy that aims to assemble a leading firm within a certain industry through an amalgamation of acquisitions and natural growth. A roll-up can be in combination with either an initial public offering of stock (sometimes called a "poof IPO") or a high-yield debt offering.

A more common strategy would be the strategic roll-up ("build-up" or "buy and build" strategy), which uses private equity and debt for the initial acquisitions. The strategic roll-up identii es a fragmented industry characterized by relatively small firms.

Buyout firms (e.g., private equity companies), which have industry expertise, purchase a firm as a platform for further acquisitions (add-ons) in the same industry. The goal is to build firms with strong management, develop revenue growth while reducing costs, with the objectives of improved margins, increased cash flows, and increased valuations.

It is vital that the consolidation strategy takes place in industries where acquisitions could be strategically well integrated and where the synergies of consolidation comprise both revenue enhancements and cost savings.

In addition, characteristics of these industries are high fragmentation (i.e., numerous small competitors), a considerable industry revenue base (i.e., multibillion), maturity of industry (moderate-to-slow growth in overall industry revenues), no dominant market leader, and a small number, if any, of national players.

Thus critical mass is attainable with a manageable number of acquisitions and numerous willing sellers with profitable operations. These features generate the opportunity for a well-financed, professionally managed group to rapidly achieve a national presence and a leading role in an industry through acquisitions.

Roll-Up
Roll-Up