Roll-Up Merger

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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.

BREAKING DOWN '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.

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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. How has Google's operations strayed from its original mission statement?

    Google's (GOOG) mission statement has been the same since its inception in 1998: "Organize the world's information and make ... Read Full Answer >>
  3. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  4. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  5. What does residual value represent in a private equity investment?

    It is common to see a private equity investment's net asset value, or NAV, referred to as its residual value, since it represents ... Read Full Answer >>
  6. How much, if any, influence do non-controlling interest shareholders have?

    Non-controlling interest shareholders do not typically have much influence. The level of influence can vary, however, depending ... Read Full Answer >>

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