The Complete Guide to Roll-Up Strategy in the Lower Mid-Market

Roll-ups are not complicated in theory. Buy fragmented businesses in the same industry, integrate them onto a common platform, and create value through scale, operational efficiency, and multiple arbitrage. The theory is simple. The execution is where firms separate themselves.

Why Roll-Ups Work

The lower mid-market is the last truly fragmented segment of the economy. Industries like HVAC, landscaping, dental practices, home healthcare, IT services, and commercial cleaning are dominated by thousands of small, founder-owned businesses doing $1M-$10M in revenue. Most have never been approached by a buyer. Most have no succession plan.

The math is compelling:

• Buy: Acquire a $3M EBITDA platform at 5-6x
• Add: Bolt on four $500K EBITDA companies at 3-4x
• Result: $5M EBITDA platform valued at 7-9x
• Value created: The multiple expansion alone generates significant returns before you touch operations

But the strategy only works if you can find, qualify, and close enough acquisitions to maintain momentum. Most roll-ups stall not because of integration challenges, but because the sourcing pipeline dries up.

The Sourcing Bottleneck

Here is the math that kills most roll-ups:

• To close 4 bolt-on acquisitions per year, you need to evaluate 40-60 companies
• To evaluate 40-60 companies, you need to identify and qualify 200-400 targets
• To identify 200-400 targets, you need to screen thousands of companies in your target vertical and geography

Most PE firms do not have the sourcing infrastructure to sustain this funnel. Their deal team spends 60% of their time sourcing and 40% actually doing deals. The ratio should be inverted.

Building the Sourcing Engine

The firms that execute roll-ups successfully treat sourcing as a systematic process, not a sporadic activity:

1. Define Tight Criteria. Not "home services companies in the Southeast." More like "residential HVAC companies, $2M-$8M revenue, founder-owned, operating for 10+ years, within 150 miles of an existing platform location, with recurring maintenance revenue representing 30%+ of total revenue."

2. Source Continuously. Sourcing is not a quarterly exercise. It is a daily process. The best opportunities emerge unpredictably. If you are only looking when you need to buy, you are already behind.

3. Build Relationships Before You Need Them. The owners who sell to you are not the ones who responded to a cold email last week. They are the ones you have been nurturing for 6-18 months. Sourcing is the top of a relationship funnel.

4. Track Everything. Every company screened, every owner contacted, every conversation held. Your sourcing CRM is as important as your deal CRM.

Where Ted Fits

Ted handles steps 1-3 at scale. Define your thesis, and Ted identifies hundreds of matching companies monthly, verifies ownership and estimated financials, scores thesis fit, and delivers qualified targets ready for outreach. Your deal team focuses on relationship building and deal execution, not spreadsheet building and database searching.