(sometimes spelled "Roll-up" or "Roll up") is a technique used by investors (commonly venture capitalists
and hedge funds
) where multiple small companies in the same market are acquired and merged. The aim is to reduce costs through economies of scale
. Rollups are also created to reduce competition in small risky markets such as dot-com
technology, where there are often many start-ups but room for only a few to succeed. An investor, faced with an opportunity to invest in two competing companies, may reduce risk by simply investing in both and merging them. Rollups are often part of the shakeout
process during an economic downturn or as new market sectors begin to mature.
Rollups of complementary or unrelated companies are also done to:
- Build a full-capability company, when it would be too costly or time consuming to develop the missing pieces through internal expansion.
- Blending companies have different financial metrics, often to make the combined company attractive for investment, mergers and acquisitions, or an initial public offering.