TL;DR: Private-equity roll-ups create value two ways: 1) increasing EBITDA at each of the acquired companies; and, 2) moving the combined company into a higher valuation tier. The second method is essentially “free” and a lot less work than growing revenues.
While you are working 996 to grow your EBITDA from $2M to $4M to double your business, the PE guys are buying three or four companies of your size, at multiples of 3-4x each, then bolting them together and selling the bundle for 9x. Same revenues and same operating margins as you, but they get 5-6 more turns on the EBITDA multiple.
The principle is called multiples arbitrage and, before you get angry, know that you can play this game too. The strategic lesson here for founders is to go beyond asking yourself, “How do I grow EBITDA?” to asking a more nuanced, “What would cause the market to put my company in a different valuation bracket?”
What’s Going On
Most founders believe that if they grow EBITDA then the value of their company will rise proportionally. That’s true, but it’s not a straight-line proportion and it’s not a guarantee, either. Especially in the lower middle market, where the largest volume of M&A deals happen[1], EBITDA multiples are not a fixed number per industry sector but rather a relative proxy for risk and buyer confidence.[2]
Here’s the simple math for the scenario above: for every $1M of acquired EBITDA…
- At 4x multiple, it was purchased from you for $4 million
- At 9x multiple, it would be valued at about $9 million when the PE sells the roll-up
- Implied valuation uplift for that $1M of EBITDA: $5 million
You should be thinking of ways that you can capture some of this value-add for you and your company.
Examples
Guild Garage Group is a good lower-middle-market example. The company was created in 2024 as a roll-up of residential garage-door repair and replacement businesses. In less than two years, it completed 30 acquisitions and grew to more than $300 million in annual revenue and approximately $50 million in EBITDA. Guild’s individual acquisition prices were never disclosed, so we don’t know the exact arbitrage spread, but in March 2026 Reuters reported that Oak Hill Capital had agreed to acquire Guild for more than $800 million, which is a calculated valuation of at least 16x EBITDA.[3] This is for garage doors.
By comparison, the well-known gaming brand Zynga also exited at 16x EBITDA.[4]
Another example in the tech sector would be IT Managed Services (MSPs). Owner-operator MSPs under $5 million in EBITDA typically sell for 3.5x to 5x EBITDA, which is a modest reward for years of building the business. But once those same businesses get folded into a platform with $10 million-plus in recurring revenue and a real cybersecurity practice, buyers like Evergreen Services Group, New Charter Technologies and Dataprise are paying 10x to 13x EBITDA for the combined entity.[5] That’s a similar 4x-to-9x spread as in the math above, now repeating itself across dozens of deals a year.
Multiples arbitrage is a structural feature of how buyers price larger scale, more predictable recurring revenue and the comfort of reduced risk relative to a single founder-run shop. If you’re sitting on a $2 million EBITDA business, the market is telling you, in writing, that it is worth more to combine you with three of your competitors.
What Founders Can Do
Bain defines a buy-and-build strategy as a platform company making at least four repeated add-on acquisitions.[6] PitchBook reported that add-on acquisitions represented 75.9% of U.S. private-equity buyout activity by volume in the second quarter of 2025.[7]
This is not a niche tactic; it has become one of the market’s dominant value-creation models. So you can play this game, too.
How? As in the garage doors example, if your startup operates regionally you can acquire several competitors and combine back-office operations and field services route density to boost margins (in sectors outside of tech, companies often use bank loans and SBA loans to finance acquisitions). If your startup competes within a larger supply-chain, you can look to the operators to your left and to your right and consider merging into a more vertically integrated player, which in turn becomes more attractive to potential acquirers. A little bit of focused thought will yield plenty of ideas for inorganic growth.
Just know that stapling a few companies together doesn’t guarantee higher multiples; it must be earned. PE buyers and strategic M&A buyers pay more only when scale creates genuine advantages: more stable recurring revenue, broader geographic coverage, efficient route density, purchasing leverage, cross-selling opportunities, stronger data, professional management, reduced customer concentration, et cetera.
Perhaps most importantly, scouting and negotiating your own tuck-in acquisitions has a way of forcing you out of daily operations to focus on larger goals. And that is a good thing, because M&A acquirers also pay more when the business does not depend on its founder and is capable of surviving an ownership transition.
The conclusion: stop treating your EBITDA valuation multiple as something the market has already assigned to your sector, and start treating it as something your company can deliberately engineer.
Sources
- CapitalPad, “Lower Middle Market Private Equity Report”
- Bain & Company, “Private Equity Buy-and-Build: How to Get It Right”
- Reuters, “Oak Hill Capital to acquire Guild Garage Group in $800 million-plus deal, sources say”
- Seeking Alpha, on the Take-Two/Zynga acquisition multiple
- CT Acquisitions, “MSP M&A Multiples Report 2026”
- Bain & Company, “Building a Stronger Buy-and-Build” (Global Private Equity Report 2024)
- PitchBook, “Q2 2025 US PE Breakdown”