Private equity roll-up
Also called roll-up, buy-and-build
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is private equity roll-up?
A private equity roll-up is a strategy in which an investment firm buys one company as a platform, then adds smaller ones in the same industry. The acquisitions are called add-ons; the firm combines them into one larger business and aims to sell it later for more than the parts cost.
How it works
Distribution suits roll-ups because the industry has many family-owned companies, and combining them can produce savings in purchasing, systems and back-office work. For employees, a roll-up means new owners, a push to standardize systems such as the ERP, and a focus on growing EBITDA before the next sale.
Private equity roll-up example
A private equity firm buys a regional fluid-power distributor, then adds four smaller distributors in nearby states over three years and moves all five onto the platform company’s ERP.
Related terms
- EBITDAEBITDA (earnings before interest, taxes, depreciation and amortization) is a company’s operating profit before financing costs, taxes and non-cash charges.
- DistributorA distributor is a company that buys products in bulk from manufacturers, holds them in stock and resells them in smaller quantities to other businesses.
- Enterprise resource planning (ERP)Enterprise resource planning (ERP) software is the central system a distributor runs on, holding orders, inventory and accounting in one database.
