Why the Roll-Up Model Is Breaking — and What Comes Next

New research is confirming what many have already sensed: the traditional roll-up model and private equity exit strategies are cracking under pressure. What was once a fool proof playbook — buy small at 6–8x EBITDA multiples, bundle, scale quickly, and flip at 14–18x — is now struggling to deliver on its promises.

The Roll-Up Strategy Crisis: Compressed EBITDA Multiples and Fewer Exit Opportunities

The core issue? EBITDA multiples have compressed, and private equity exit opportunities are drying up. The old “buy low, roll up, exit high” roll-up strategy that once fueled growth is now running into significant headwinds. Public markets are demanding more discipline, favoring free cash flow and organic margin expansion over aggressive M&A-driven growth. As a result, roll-up platforms are no longer attractive acquisition targets for strategic buyers, who see such deals as dilutive to their own multiples.

This dynamic puts private equity sponsors in a difficult position: they face a shrinking pool of viable exit opportunities and pressure to sell before their fund timelines expire. The rushed M&A process often results in suboptimal buyers and short-term ownership cycles, creating instability rather than lasting value. The math simply doesn’t work like it used to.

Rethinking M&A Strategy Amid Private Equity Exit Challenges

With EBITDA multiples compressed and exit opportunities becoming scarce, the traditional roll-up strategy is being re-evaluated by private equity firms. Many are shifting focus away from deal volume towards more sustainable organic growth. Some platforms are slowing acquisitions or even repurchasing stock, prioritizing stability over expansion. This reflects a broader change in M&A strategy: a move away from rapid consolidation toward building durable businesses with long-term value.

At Legacy, we’re taking a different path. Rather than chasing quick exits, we focus on building small, regional portfolios of essential service companies backed by long-term investors who prioritize steady returns over flashy roll-up exits. By adopting a disciplined M&A process and resisting the pressure to grow through aggressive roll-ups, we aim to cultivate businesses that can thrive sustainably well beyond private equity timelines.

Here’s what’s happening in the real world:

Real-World Examples: The Roll-Up Squeeze

• Limbach ($LMB) – Commercial HVAC
  Down to 12x EBITDA (from 15x), despite strong performance. Even debt-free, M&A-based growth isn’t being rewarded.

• Comfort Systems ($FIX) – HVAC/Electrical
  $900M+ EBITDA, $500M cash on hand, but still trading at 12–13x — down from 17–18x.

• Builders FirstSource ($BLDR) – Building Products
  $2.2B EBITDA, trading around 9x. M&A has paused. Buybacks now seen as a better use of capital.

• APi Group ($APG) – Life Safety
  Trading at 12–13x despite continued acquisitions. Valuation is flat — upside capped.

• Mister Car Wash ($MCW) – Consumer Roll-Up
  Around 10x EBITDA. They’ve moved on from roll-ups to greenfield expansion for more control.

• Vail Resorts ($MTN) – Ski Roll-Up
  $875M EBITDA, trading at ~10x. No scale premium, despite brand strength.

• BrightView ($BV) – Landscaping
  Trading at 7.5x EBITDA with leverage. Public markets aren’t buying the roll-up narrative.

• DentalCorp ($DNTL) – Dental Roll-Up
  From mid-teens to ~8.5x EBITDA. Acquisitions haven’t driven valuation gains.

• ABM Industries ($ABM) – Janitorial & Facilities
  Once highly acquisitive, now trading at 9–10x EBITDA. Focus is on margins and clean operations.

• Rollins Inc. ($ROL) – Pest Control
  Still at 20x+, but the pace of M&A is slowing. Market isn’t rewarding inorganic growth the same way.

• Waste Connections ($WCN) – Waste Services
  Trading at ~15x, down from 18x. Shifted from deals to pricing and internal leverage.

• US Physical Therapy ($USPH) – Healthcare Services
  At ~11–12x EBITDA. Flat organic growth and higher integration costs dragged valuation.

Why Operational Excellence and Local Scale Trump Financial Engineering in Today’s Market

The message is clear: the market is rewarding substance over story.

In this environment, local scale and operational excellence matter more than financial engineering. Time-tested businesses run by people who know the market — not spreadsheets — are becoming more valuable.

And that’s exactly the kind of business we’re focused on building.