What Is Roll-Up Strategy? | Agency M&A Definition
A roll-up strategy involves acquiring multiple smaller agencies and combining them into a single, larger organization to achieve economies of scale, expanded service offerings, and a higher valuation multiple. It is a common growth strategy among private equity-backed agency holding companies and ambitious independent agency founders looking to build scale rapidly.
Roll-Up Strategy in Agency M&A
The marketing agency industry is highly fragmented — thousands of small shops generating $500K-$3M in revenue — which makes it ideal for roll-up strategies. A buyer might acquire four or five specialized agencies (one in SEO, one in paid media, one in creative, one in web development) and merge them into a full-service agency that commands premium pricing and larger client contracts. The financial logic is compelling: individual agencies might sell at 4-5x EBITDA, but the combined entity, with diversified services and reduced client concentration, could be valued at 7-8x. This “multiple arbitrage” is the primary economic engine behind most agency roll-ups. Execution is where roll-ups succeed or fail. Integrating different agency cultures, tech stacks, billing systems, and management styles is notoriously difficult. The most successful roll-ups maintain brand autonomy for each acquired agency during the first 12-18 months while gradually consolidating back-office operations. Buyers pursuing roll-ups should establish a standardized integration playbook before making their second acquisition.
How Roll-Up Strategy Affects Agency Valuation
Roll-up strategies create value through multiple arbitrage — buying small agencies at lower multiples and selling the combined entity at a higher one. A roll-up that acquires five agencies at an average of 4.5x EBITDA and builds a combined entity valued at 7x creates significant equity value purely through aggregation. For individual agency sellers, being part of a roll-up can be positive or negative. On the upside, roll-up buyers often move quickly and have established deal processes. On the downside, they may offer lower multiples for individual acquisitions because their profit comes from the spread. Sellers evaluating roll-up offers should assess whether earnout provisions are tied to standalone or combined entity performance, as this distinction significantly affects payout probability.
Example
A PE-backed holding company executes a roll-up, acquiring four marketing agencies over 18 months: a paid media agency ($1.2M revenue, $240K EBITDA, purchased at 4.5x for $1.08M), an SEO agency ($900K revenue, $180K EBITDA, at 4x for $720K), a creative agency ($1.5M revenue, $330K EBITDA, at 5x for $1.65M), and a web development shop ($800K revenue, $200K EBITDA, at 4x for $800K). Total acquisition cost: $4.25M for combined EBITDA of $950K. After integration, the combined entity generates $4.4M revenue with $1.05M EBITDA (synergies add $100K). Valued at 7x as a diversified full-service agency, the enterprise value is $7.35M — creating $3.1M in equity value above acquisition cost.
Related Terms
Further Reading
Ready to find out what your agency is worth?