11 Aug 2014

Definition of ‘Rollup’

A rollup (also known as a “roll up” or a “roll-up”) is when when investors (often private equity firms) buy up companies in the same market and merge them together. Rollups combine multiple small companies into something bigger and better able to enjoy economies of scale. Private equity firms use rollups to rationalize competition in crowded and/or fragmented markets and to combine companies with complementary capabilities into a full-service business, for instance, an oil exploration company can be combined with a drilling company and a refiner.

Investopedia explains ‘Rollup’

Rollups are a part of the consolidation process that occurs as new market sectors mature. Combined companies can provide more products and/or services than a smaller, independent player. Combined companies can also expand their geographic coverage and enjoy the economies of scale and greater name recognition that size confers. Larger companies are usually valued at a higher multiple of earnings than are smaller companies, so a private equity firm that has bought and integrated smaller businesses can sell the rolled-up firm at a profit.

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