The Roll Up, Reconsidered: Where Buy and Build Works, and Where It Breaks

Private equity has spent the past decade building companies by buying them in pieces. A sponsor acquires a platform in a fragmented industry, then adds smaller competitors one after another, assembling a larger business out of many small ones. The approach has a plain commercial logic and, done well, a long record of success. It also fails often enough to deserve more scrutiny than the present enthusiasm tends to give it.

The strategy now dominates the asset class. Add on acquisitions made up roughly three quarters of all United States private equity buyouts by deal count in 2025, and about two thirds of European buyouts, according to PitchBook. The roll up has become the default structure of a private equity deal. This note sets out why it works, why so many attempts miss, which sectors and regions suit it, and how we see it over the next three to five years.

What a roll up is, and how large it has become

A roll up, also called buy and build, begins with a platform company in an industry made up of many small operators. The sponsor uses that platform to acquire competitors, suppliers or adjacent businesses, each one an add on, and combines them into a single larger group. The most common targets are industries with thousands of independent operators and no dominant player: insurance brokers, veterinary and dental practices, accounting and engineering firms, heating and plumbing contractors, and vertical market software vendors.

The scale of the activity is easy to understate. PitchBook data puts add ons at about 74 to 76 percent of United States private equity buyouts by deal count through 2025, and roughly 67 percent of European buyouts in early 2025. Mergermarket records the ratio of bolt on acquisitions to new platform purchases in Europe rising from around 0.7 times in the early 2010s to 1.8 times in 2025. For most sponsors, the platform purchase is the first step in a planned programme of further acquisitions.

Why private equity relies on it

The appeal begins with arithmetic. Small companies change hands at lower earnings multiples than large ones, so a sponsor can buy a series of small businesses at, say, six or seven times earnings, combine them, and value the enlarged group at ten or twelve times. This repricing, known as multiple arbitrage, creates value on paper before any operational improvement. Scale then adds more, through shared overheads, greater purchasing power, a single management team, and the ability to sell a wider range of services to the combined customer base.

The evidence that disciplined acquisition creates value is stronger than the sceptics allow, and the recent work reinforces it. L.E.K. Consulting examined more than 5,400 listed companies over 2016 to 2025 and found that serial acquirers, which it defines as making at least one acquisition in each of three consecutive years, outperformed companies that acquire only occasionally by more than 11 percent a year, and purely organic growers by more than 14 percent, measured on total shareholder return. McKinsey's longer running research on what it calls programmatic M&A, a steady stream of small to mid sized deals, reaches the same conclusion across the Global 2000. For a sponsor deploying a large fund into a fragmented market, buy and build is a way to put significant capital to work in disciplined increments while compounding returns over a holding period. That is why the strategy has become the default.

The compounders, and why they trade at a premium

The most instructive examples come from listed serial acquirers that have run the strategy for decades. Constellation Software, the Canadian group led by Mark Leonard, has acquired hundreds of small vertical market software businesses, each one modest on its own, and compounded shareholder capital at high rates for more than twenty years. Danaher and Roper Technologies in the United States have done the same across industrial and software niches. Leonard has said he studied a dozen serial acquirers, Danaher and Roper among them, before concluding that vertical market software suited the model best, because such businesses are small, numerous, cash generative and rarely fought over.

These companies trade at high earnings multiples, often above twenty times, and the premium is deliberate. The market is paying for a proven and repeatable ability to allocate capital, which is scarcer than any single asset. The contrast between the accumulators and the large platforms is worth noting. Constellation buys many very small businesses, which keeps entry prices low and the opportunity set wide. Danaher and Roper now write cheques of several hundred million dollars or more at close to twenty times earnings, which makes the entry multiple, and the discipline around it, their central question. Larry Culp, Danaher's former chief executive, set out the criteria plainly: a market above one billion dollars, core growth of five to seven percent, and a fragmented field of smaller competitors.

Why so many miss

The same strategy fails often, and the most recent data is as cautionary as the longstanding warnings. A 2026 analysis of buy and build deals by BCG and HHL Leipzig, reported by CapitalPad, found that platforms making two or more add on acquisitions produced the lowest returns of any cohort, even though they generated the fastest revenue growth. Buying more did not translate into earning more. The older research points the same way: a frequently cited 2008 study by Paul Carroll and Chunka Mui found that more than two thirds of roll ups failed to create value for their investors.

The usual point of failure is integration. Buying a company is quicker than absorbing it, and the complexity of combining separate businesses, their systems, their people and their cultures, accumulates faster than most management teams expect. Practitioners often describe a wall around the third or fourth acquisition, where the work of integration overtakes the capacity to do it and performance deteriorates quickly. A second problem is price. Once a market knows a sponsor is buying, the owners of the remaining targets raise their asking prices, and the arbitrage that justified the strategy narrows. McKinsey put average private equity entry multiples at a record 11.8 times earnings in 2025, which leaves little room for the repricing the model relies on. A third is debt. Roll ups are usually financed with borrowing, and a programme that works at low interest rates can fail at higher ones, when the cost of servicing the debt consumes the cash the acquisitions were meant to produce.

The current environment has exposed all three. Bain reports that the long period of rising valuations and cheap borrowing that flattered private equity returns has ended. In its data on software buyouts, revenue growth now accounts for about 52 percent of value creation and multiple expansion for 42 percent, with margin improvement a distant third at 6 percent. The share of Asia Pacific managers citing multiple expansion as a leading source of returns has fallen from 69 percent to 24 percent over five years. Value increasingly has to be built inside the business, through growth and margin, because the market will no longer hand it to the sponsor.

The veterinary sector shows how this plays out in practice. Private equity and private credit spent a decade consolidating independent clinics into large groups, financed heavily with debt. By the third quarter of 2025, business development companies alone held about 3.1 billion dollars of loans to veterinary consolidators, according to Octus. Demand has since softened, with wellness visits down around 3 percent and product visits down roughly 7 percent, and some of those loans have been marked below face value. Lenders carried one PetVet Care Centers position at 88 cents on the dollar, and Ares marked subordinated loans to AmeriVet at 83 cents. Reported private equity multiples for pet sector deals fell from about 16.8 times earnings in 2024 to 9.9 times in 2025. Thrive Pet Healthcare, owned by TSG, exchanged debt and pushed its maturities out to 2028. The industry now speaks of a consolidation of the consolidators.

The strain reaches beyond any single sector. In early 2026 Pretium Packaging, a plastic container business built by acquisition and owned by Clearlake Capital, filed a prepackaged Chapter 11 to remove roughly 900 million dollars from a debt load of about 1.8 billion. The restructuring was agreed with lenders and the business continued to operate, but the episode is a clear marker of where a decade of debt funded consolidation has left some platforms.

The pattern is not new. In the late 1990s the Loewen Group assembled more than 650 funeral homes and cemeteries across North America, funded by debt that reached more than three billion dollars. When its share price collapsed in early 1999, from around 36 dollars to roughly 5, the acquisitions could no longer be financed and the company filed for bankruptcy. Its assets were eventually acquired by Service Corporation International, which went on to consolidate the same industry successfully and operates today. Loewen's failure came from its debt and the pace of its buying.

Where it works, and where it does not

The strategy suits some sectors far better than others. It compounds most reliably where the targets are numerous and small, the revenue recurs, and the value of the business does not depend on the founder remaining after the sale. Vertical market software is the clearest example, which is why Constellation and its many imitators concentrate there. Insurance broking, with its renewing commissions, and much of business to business services share those qualities. These are the fields where buy and build has delivered most consistently.

The casualties cluster in sectors with the opposite characteristics. In veterinary and dental care the relationship with the client is personal, and retention and culture weaken once the selling owner gives up ownership, which is the stress now visible in the veterinary figures. Businesses that depend on specific individuals, or that were consolidated at high prices with heavy debt during the cheap money years, are where roll ups most often come undone.

Geography matters as well. The United States remains the deepest market for the strategy, with the widest set of fragmented industries and the most developed private credit to fund them. Europe has become, in PitchBook's description, an add on engine, with bolt on acquisitions now the main form of buyout activity, though a fragmented mix of regulators and sectors makes very large roll ups harder to assemble than in the United States. In Asia, Bain reports that buy and build is gaining prominence among mid sized assets in India as large deals have slowed, and that buyout activity is rising across India, Southeast Asia and Greater China, although the strategy there is at an earlier stage of development.

Our view for the next three to five years

The roll up is a durable strategy that is entering a more demanding phase. The evidence that disciplined serial acquisition creates value is strong, and with three quarters of private equity deals now add ons, the model is not going to retreat. What has gone is the version that relied on buying cheaply, borrowing heavily and selling into a rising market. Over the next three to five years we expect returns to separate sharply by operator and by sector, and the questions below are the ones we would ask of any platform before backing it.

• Integration capacity. Can the platform genuinely absorb what it buys, or is it accumulating businesses faster than it can combine them into one operation.
• Durability of value. Does the value of the acquired business survive a change of ownership, or does it rest on founders and relationships that leave with the sale.
• Debt serviceability. Can the structure carry its borrowing at current interest rates without depending on a sale into a rising market to make the numbers work.

Most private equity already runs some form of roll up. The harder question is whether a given platform, in a given sector, carrying a given level of debt, can turn a stream of acquisitions into one business worth more than the sum of what was paid for its parts.

This article is produced by Brenton Financial Research for informational and educational purposes only. It discusses companies and transactions using publicly available information and reflects the research team's analysis, which is open to debate. Figures are drawn from the third party sources cited, vary by methodology, and are approximate. Nothing here constitutes financial, investment, legal, or tax advice, or a recommendation regarding any company, fund, or security. Brenton Financial Pty Ltd (ABN 21 696 298 227). Past performance is not indicative of future results.

Sources

• PitchBook, United States and European PE breakdowns, 2025 (add on share of buyouts), and Mergermarket, European bolt on to platform ratio.
• L.E.K. Consulting, Keys to M&A Success: How Serial Acquirers Drive Outperformance, 2016 to 2025 study of more than 5,400 listed companies; McKinsey & Company, research on programmatic M&A, and its 2026 report (record 11.8 times entry multiples in 2025).
• Bain & Company, Global and Asia Pacific Private Equity Reports, 2025 (value creation, multiple expansion, software buyout data).
• BCG and HHL Leipzig buy and build return data, as reported by CapitalPad, 2026; Paul Carroll and Chunka Mui, Billion Dollar Lessons, 2008; company disclosures on Constellation Software, Danaher and Roper Technologies.
• Octus (veterinary private credit exposure and loan marks, Q3 2025); R.L. Hulett (pet sector deal multiples); Bloomberg and PlasticsToday on the 2026 Chapter 11 of Pretium Packaging; contemporaneous reporting on the Loewen Group and Service Corporation International.