Rollup

A Rollup (also "Roll-up" or "Roll up") is a technique used by investors (commonly private equity firms) where multiple small companies in the same market are acquired and merged. The principal aim of a rollup is to reduce costs through economies of scale. It also has the effect of increasing the valuation multiples the business can command as it acquires greater scale. Rollups may also have the effect of rationalizing competition in crowded and fragmented markets, where there are often many small participants but room for only a few to succeed.

An investor faced with an opportunity to invest in two competing companies may reduce risk by simply investing in both and merging them. Rollups are often part of the shakeout and consolidation process during an economic downturn or as new market sectors begin to mature.

Rollups of complementary or unrelated companies are also done to:

• Build a full-capability company, when it would be too costly or time consuming to develop the missing pieces through internal expansion.
• Blending companies have different financial metrics, often to make the combined company attractive for investment, mergers and acquisitions, or an initial public offering.

Kraft Foods (now renamed Mondelēz International) was a very early example of a rollup, in the dairy industry. Waste Management was the most notable rollup made during the 1970s and 1980s. Waste Management's acquisition of 133 small-time haulers quickly became the largest waste disposal company in the United States. The characteristics that can make a rollup attractive are where either there are many small players in fragmented markets or where technology can play an essential role in revitalizing industries with small margins but technology can impact growth and profits. AutoNation was also a successful rollup effort in the car dealership space spearheaded by Wayne Huizenga, founder of Waste Management. The other reason companies do rollups is due to the higher earnings multiple achievable in businesses with large scale relative to smaller mom and pop operations which remain vulnerable to changing markets and poor access to capital markets. A recent rollup is Valeant Pharmaceuticals International that used more than $30 billion to acquire over 100 companies.

See also

• Ideal firm size
• Economies of scale

Private equity and venture capital
Basic investment types	Buyout Venture Mezzanine Growth Secondaries Equity co-investment
History	History of private equity and venture capital Early history of private equity Private equity in the 1980s Private equity in the 1990s Private equity in the 2000s
Terms and concepts	Buyout Financial sponsor Management buyout Divisional buyout Buy–sell agreement Leveraged recapitalization Dividend recapitalization Venture Angel investor Business incubator Post-money valuation Pre-money valuation Seed money Startup company Venture capital financing Venture debt Venture round Structure Private equity firms and funds Limited partnership Limited liability company Carried interest Management fee Publicly traded private equity Business Development Company Venture capital trust Private investment in public equity (PIPE) Pledge fund
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Related financial terms	AUM Cap table Capital call Capital commitment Capital structure Distribution waterfall EBITDA Envy ratio High-yield debt IPO IRR Leverage Liquidation preference M&A PME Taxation of private equity and hedge funds Undercapitalization Vintage year
Private equity and venture capital investors Private equity firms Venture capital firms Angel investors Portfolio companies