Aggregation , referred to as ‘roll-up’ is combining multiple smaller entities in the same market into a larger entity.

The primary trigger for a roll-up is the need for consolidation in a market which is getting matured. In this scenario, existing players face slowing growth & increasing competition. Hence, consolidation leads to capacity rationalisation and re-alignment of competition dynamics.

Smaller companies benefit from roll-ups as per following:

1. Economies of scale owing to cross-synergies & common management functions.
2. Larger size of the holding company gives strength & heft to the standalone SME’s
3. Infusion of high quality talent leading to world class vision along-with use of increasingly sophisticated management tools & specialised knowledge

As a result, the SME promoter’s stake in the holding company appreciates in value & leads to a monetisation opportunity.