Leveraged buildup

For other uses, see Roll-up (disambiguation).

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. also have 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 (recently 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 70's and 80's. 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.

See also

External links

  • Roll Up on Investopedia
  • The Rollup by Valleywag


This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and USA.gov, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for USA.gov and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
 
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
 
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.