Roll-Ups and Buy-and-Build: How PE Grows Small Companies

A roll-up, or buy-and-build, is how private equity grows a small company into a big one: buy a "platform" business in a fragmented industry, then bolt on many smaller rivals at lower prices, share back-office costs, and sell the combined company at a higher multiple. It works best in industries full of owner-run firms, such as HVAC, dental, veterinary and accounting. It fails when the debt outruns the savings or prices rise too far.

You have probably already met a roll-up without knowing it. The local vet now has a corporate name on the receipts. The plumbing firm with the friendly family name answers the phone from a call centre two states away. The accountant who retired sold to a firm backed by a fund.

This is the main way private equity makes money from small businesses, so it is worth understanding even if you never run one. It also tells you who might buy your business one day, and what they will pay for it.

How does a roll-up make money?

Three effects stack up.

Multiple arbitrage. Small businesses sell for lower multiples of profit than large ones. Bain puts it simply: smaller companies consistently trade for lower multiples than bigger ones. A fund that buys a platform at a high multiple can tuck in smaller add-ons at lower ones, which "brings down the firm's average cost of acquisition." In Bain's veterinary example, small practices could be bought at a mid-single-digit EBITDA multiple against a mid-teens multiple for the platform. When the whole group is later sold at the larger company's multiple, the add-ons' profit is revalued upward.

Cost savings. Shared purchasing, one payroll and accounting team, one software system, better insurance rates. These are real when the businesses are integrated.

Pricing and growth. A bigger group can charge more, win larger contracts and cross-sell. In healthcare this is where roll-ups draw the most criticism, as the risks section shows.

Here is the arithmetic with round, hypothetical numbers. A platform with $5 million of EBITDA is bought at 10 times, so $50 million. It buys ten small firms with $500,000 of EBITDA each at 5 times, $25 million in total. The group now has $10 million of EBITDA and cost $75 million. If a buyer pays 10 times for the combined group, it is worth $100 million before a single cost is cut. That $25 million gap is the multiple arbitrage, and debt usually paid for much of it.

Which industries get rolled up?

Industries with thousands of small, owner-run firms, steady demand and owners near retirement.

Accounting shows how far it has gone. Baker Tilly called the investment it took from Hellman & Friedman in 2024 the largest private equity investment in the US CPA sector at that point. Grant Thornton took a New Mountain Capital investment the same year, and in July 2026 announced it would acquire CBIZ for $5 billion.

What goes wrong with roll-ups?

Debt. Roll-ups are usually financed with borrowed money, and the plan only works if profits keep rising. When they do not, the debt stays.

• Envision Healthcare, taken private by KKR in 2018 in a deal valued at $9.9 billion including debt, filed for Chapter 11 in 2023 citing $7.7 billion in debt obligations. The bankruptcy wiped out KKR's investment.
• Air Pros, a PE-backed HVAC roll-up, filed in 2025 with total debt exceeding $250 million. Its restructuring officer said each business unit ran its own operating model, which led to "a lack of economies of scale."
• Dental Care Alliance cut more than $1.1 billion of debt in 2026 by handing ownership to its lenders.

Integration that never happens. The savings only arrive if the businesses actually share systems and costs. Air Pros is the warning: buy 20 businesses, run them 20 ways, and you have 20 times the complexity with none of the scale.

Prices for targets rise. Bain warns that too much demand for too few targets will drive up prices and compete away the multiple-arbitrage opportunity. Once every fund wants HVAC companies, small HVAC companies stop being cheap.

Regulators. The FTC and Justice Department opened a public inquiry into serial acquisitions and roll-up strategies in 2024, noting that many of these deals are too small to be reported to them. In 2023 the FTC sued U.S. Anesthesia Partners and its backer Welsh Carson over what it called a roll-up scheme buying up nearly every large anesthesia practice in Texas. Welsh Carson was dismissed from the case in 2024 and later accepted an FTC order to notify it of future acquisitions. The FTC reached an agreement in principle with USAP in April 2026, with terms still confidential.

Higher prices for customers, in healthcare at least. A JAMA Health Forum study of 578 PE-acquired dermatology, gastroenterology and ophthalmology practices found the average allowed amount per claim rose by $23 (11%) after acquisition. A study of PE-owned gastroenterology practices found prices up 28.4% per claim. That is good for the owners and is the reason regulators are watching.

Can an individual do a small roll-up?

Yes, at a small scale, and many people who buy one business end up buying a second. The logic is the same: the second and third businesses are often cheaper per dollar of profit than the first, and they can share your office, your software and your best manager.

The risks scale too. Each purchase is another loan and often another personal guarantee. A sensible order:

1. Run the first business well for a year or more. Systems and a manager who can run it without you come before any second deal.
2. Buy only in the same industry and area. That is where shared costs and staff are real.
3. Integrate before buying again. One booking system, one payroll, one set of prices.
4. Price each add-on on its own cash flow, never on what the combined group might sell for one day.
5. Check the debt on every deal in the business acquisition calculator, including the line that cuts earnings by 20%.

What it means if you are a seller

If you own a small business in a rolling-up industry, a platform may call you. The offer might be good, and part of it may be paid in shares of the platform, an earn-out or a role with targets. Ask what multiple the platform itself was bought at, how much debt it carries, and what happens to your rolled-over shares if it is sold or refinanced. Paper in a heavily borrowed group is worth less than cash.

The series hub at how to do private equity explains the fund side, and search funds and independent sponsors covers how individuals raise money for bigger deals.

This is general information, not financial, legal or tax advice. The examples are drawn from the public sources linked and describe allegations or settlements where that is how the source describes them.