Add-On Acquisitions & Roll-Ups

An add-on acquisition is a smaller company a sponsor acquires and folds into an existing platform portfolio company. The goal is to build scale, capability, or geographic reach around the platform, and a series of add-ons executed against one thesis is what becomes a roll-up. Each deal is a transaction in its own right, but it is structured, financed, and integrated as part of the platform's larger arc.

A single buyout is one acquisition, held and sold on its own merits. A roll-up is a program: a platform bought with debt capacity to spare, then a sequence of smaller companies folded into it, with the return coming from scale, from a higher multiple on the combined business, and from costs taken out. The legal work changes shape. The purchase agreement becomes a form, the credit agreement's permitted-acquisition basket becomes the budget, and integration becomes a checklist run every few months rather than once.

Four things, settled at the platform stage. A credit agreement whose permitted-acquisition basket and incremental facility match the pipeline. An equity structure at the holding company that can take seller rollover without a renegotiation each time. A form purchase agreement with a short list of open points, usually price, earn-out and rollover. And a tax plan for the targets, which for S corporations means a pre-closing reorganization so the platform gets a basis step-up while the sellers defer gain on the equity they keep.

By deciding in advance what each deal is allowed to reopen. Price, earn-out and the seller's rollover are negotiated; the representations, the indemnity structure and the escrow terms are not, because they were set against the platform's insurance and its lenders' requirements at the outset. Change-of-control consents and license transfers are mapped during diligence rather than discovered at closing, and the joinder documents that bring the target into the guarantor group are drafted from the credit agreement's own schedule. One partner runs the program, so the answer to a question in deal six is the answer given in deal two.

The items that follow the target into the platform. Anti-assignment and change-of-control clauses in customer and supplier contracts, read against the deal form, because an asset purchase triggers the first and a stock purchase only the second. Licenses and permits that will not transfer, since regulated sectors often need notice or approval before closing. Employee classification and wage-and-hour exposure, because those liabilities join the platform's guarantor group on day one. And the target's own tax history, which decides whether a pre-closing reorganization is available and what the step-up is worth.

Mostly from capacity negotiated when the platform was bought. The credit agreement's incremental facility funds the senior piece, a delayed-draw term loan covers a known pipeline, and the sponsor adds equity where the next deal would otherwise breach the ratio covenant. Sellers often finance part of their own price, through a note the senior lenders will require to be subordinated, with payments blocked during a default, or through rollover equity issued at the holding company. We draft the subordination terms and the rollover documents alongside the purchase agreement so the lenders' consent is not the last signature chased.

They can, and more often than the size of any one deal suggests. Each acquisition is tested against the Hart-Scott-Rodino size-of-transaction threshold, which is adjusted every year, and a reportable deal waits 30 days after filing before it can close. Below the threshold there is no filing, but the agencies' 2023 Merger Guidelines treat a series of acquisitions as one course of conduct, and a consummated deal can be challenged under the Clayton Act long after it closed. Regulated sectors add their own approvals, from state healthcare transaction notices to license transfers. We check each add-on against the program as a whole, and where a filing, a state notice or a sector approval is required we coordinate specialist or locally admitted counsel as part of the deal.