Roll-Up Merger

AAA

DEFINITION of 'Roll-Up Merger'

A roll-up (also known as a "roll up" or a "rollup") merger occurs when investors (often private equity firms) buy up companies in the same market and merge them together. Roll-ups combine multiple small companies into something bigger and better to be able to enjoy economies of scale. Private equity firms use roll-ups 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 'Roll-Up Merger'

Roll-ups 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.

RELATED TERMS
  1. Economies Of Scale

    The cost advantage that arises with increased output of a product. ...
  2. Circular Merger

    A transaction to combine companies that operate within the same ...
  3. Merger Mania

    A period of time with significant merger and acquisition activity ...
  4. Congeneric Merger

    A type of merger where two companies are in the same or related ...
  5. Vertical Merger

    A merger between two companies producing different goods or services ...
  6. Diseconomies Of Scale

    An economic concept referring to a situation in which economies ...
RELATED FAQS
  1. What is a roll-up merger and why does it occur?

    A roll-up merger is the process of acquiring smaller companies within an industry to form one larger firm. To start a roll-up, ... Read Full Answer >>
  2. What content does a letter intent have to have?

    Letters of intent vary in purpose and content depending on the dealings between the involved parties. In a basic form, each ... Read Full Answer >>
  3. What is the difference between a letter of intent and a memorandum of understanding?

    A letter of intent is likely to encompass a number of different aspects, and it varies in length according to the level of ... Read Full Answer >>
  4. How can key performance metrics (KPIs) help evaluate employees?

    Key performance indicators (KPIs) can help evaluate employees by measuring how well they perform in meeting individual goals ... Read Full Answer >>
  5. How can a company resist a hostile takeover?

    Several different defense strategies can be applied by existing corporate boards to ward off a hostile takeover. The most ... Read Full Answer >>
  6. How does a letter of intent work in the context of mergers and acquisitions?

    A letter of intent, or LOI, is used to set forth the terms of a proposed merger or acquisition. It is usually the first step ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  3. Fundamental Analysis

    Key Players In Mergers And Acquisitions

    Strategic acquisition is becoming a part of doing business. Discover the different types of investor groups involved.
  4. Forex Education

    Mergers & Acquisitions: An Avenue For Profitable Trades

    When major corporate transactions have a big impact on the currency markets, you can benefit.
  5. Economics

    What Are Economies Of Scale?

    Is bigger always better? Read up on the important and often misunderstood concept of economies of scale.
  6. Fundamental Analysis

    Accretion / Dilution Analysis: A Merger Mystery

    This analysis tool is an effective way to value mergers and acquisitions. The deal's on the table, but should you sign the papers?
  7. Options & Futures

    Reverse Mergers: The Pros And Cons

    Reverse mergers can provide excellent opportunities for companies and investors, but there are still some downsides and risks.
  8. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  9. Insurance

    The Wonderful World Of Mergers

    While acquisitions can be hostile, these varied mergers are always friendly.
  10. Investing

    Mergers Put Money In Shareholders' Pockets

    Learn the five ways mergers and acquisitions can increase a company's value.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center