Roll-up / add-on acquisition

Definition

Buying several small companies in a trade onto one platform.

Why It Matters

The same strategy is called buy-and-build, a consolidation play, or a programmatic acquisition, and the buyer running one is often called a consolidator. It explains why some competing buyers pay prices that look aggressive: an add-on is worth more to a platform that can strip out duplicate overhead and buy scale than to a first-time owner running one location. Knowing a roll-up is active in your trade tells you both who you are bidding against and who might buy you at exit.

In numbers: A platform paying 7x EBITDA for its anchor can pay 5x for a $500k-EBITDA add-on and still profit, because the combined company trades at the platform's multiple; a first-time buyer bidding 3.5x loses that auction without being wrong.