Introduction
Roll-ups — acquiring multiple smaller businesses to build a larger platform — are one of the most profitable strategies in M&A. But financing roll-ups is complex. This guide explains how to structure capital for multi-acquisition strategies.
Why Roll-Ups Work
- Economies of scale.
- Cross-selling opportunities.
- Increased valuation multiples.
- Stronger market position.
Roll-Up Financing Challenges
- Multiple acquisitions in short timeframes.
- Diverse financial statements.
- Need for flexible capital stack.
- Balancing debt vs. equity.
Financing Options for Roll-Ups
- SBA Financing (Early Stage): Works for first acquisitions but caps at $5M.
- Senior Debt: Provides stable base for larger platforms.
- Mezzanine Debt: Fills gaps in equity and supports aggressive growth.
- Equity Partners: PE firms, family offices, or co-investors.
- Seller Financing: Common in fragmented industries.
Example Roll-Up Structure
- Buyer acquires 3 home services companies ($2M each).
- Initial SBA loan funds first acquisition.
- Subsequent acquisitions financed via mezzanine + seller notes.
- Once EBITDA grows, refinance into senior debt package.
Industries Suited for Roll-Ups
- Healthcare services.
- Home services.
- Logistics.
- Professional services.
- Consumer brands.
Pro Tips for Buyers
- Build a strong management team early.
- Standardize financial reporting across acquisitions.
- Leverage refinancing once scale is achieved.
Conclusion
Roll-ups can create tremendous value, but only if financing is structured to keep pace with growth. Yaw Capital specializes in designing capital stacks that evolve as acquisitions scale.
