IPO Roll-Ups

An IPO roll-up is a transaction that simultaneously merges several private companies and creates a publicly traded holding company that sells its shares in an IPO. Roll-ups consolidate small businesses in fragmented industries, capturing economies of scale and giving them access to capital markets that small companies do not normally have. An interesting aspect of roll-ups is that the person or group that organizes or sponsors them does not need lots of capital to initiate the transaction.

The proceeds from the IPO pay for the businesses, organizing fees, and to finance growth. With good economic sense (the proper industry must be chosen) and lots of sweat equity, a person can head up a multimillion-dollar company with almost no personal financial investment. Roll-ups have become popular because a lot of small business owners are approaching retirement and the roll-up mechanism provides a good way to sell their business.