Roll-up strategy in the German mid-market

The roll-up model has established itself as one of the most effective growth strategies in fragmented markets. It describes the systematic acquisition and subsequent consolidation of a large number of individual companies within a specific industry. The aim is to create a new, dominant market player by aggregating market share, realising economies of scale and standardising business processes. This strategy differs fundamentally from one-off acquisitions because it is built on a serial, replicable approach. In this context, target sourcing becomes not merely an operational task but the strategic centrepiece of the entire transaction.

The role of target sourcing

Within a roll-up strategy, target sourcing is the decisive lever for value creation. Whereas traditional M&A processes often react to opportunities put forward by investment banks or brokers, the roll-up model demands the proactive, systematic identification of potential acquisition targets. Target sourcing is therefore the methodical search for companies that not only meet the predefined investment criteria but also promise strategic, operational and financial synergies. A lack of systematic sourcing often leads to suboptimal deal flow, which dampens the exponential growth effects of the roll-up model.

The target sourcing process: a methodical approach

Step 1: define objectives and analyse the market

The first step is to define the investment case. This means precisely specifying the geographical and sector-specific criteria, the required financial metrics and the ideal synergy profile of a target company. A comprehensive market analysis then identifies the relevant market segments and the players active in them.

Step 2: identify and approach potential targets

Potential targets are identified on the basis of this analysis. While traditional sourcing methods such as proprietary databases or market reports have become outdated because searching for targets with them is so time-consuming, ProxDeal makes the search faster and more efficient. Instead of spending hours working through extensive datasets, you have a longlist generated automatically based on your individual criteria – reducing the process to just a few minutes. The finished longlist also includes ready-made outreach letters, so you can approach the targets directly.

More efficient target sourcing with ProxDeal

What makes target sourcing for roll-up models distinctive is the set of predefined criteria that every target has to meet – revenue, industry, geographical location or the age profile of the managing directors. Combined with the fact that the targets in question are often SMEs, this makes a manual search time-consuming and resource-intensive.

ProxDeal solves this problem with precise filtering: only relevant targets that meet all of the predefined criteria are displayed automatically. There is no longer any need to trawl through databases by hand. In addition, ProxDeal searches several million websites, including all major company and specialist registers – which means you can uncover ‘hidden gems’ that traditional databases do not contain. This gives you access to considerably more market potential.

Practical example: consolidating the skilled trades sector

The skilled trades sector is a prime example of the roll-up model in practice. This market is traditionally highly fragmented and made up of a large number of small businesses, many of them still run by their founders. Alongside practising their trade, the owners also have to act as managers and entrepreneurs – which leads to inefficiencies in areas such as purchasing, administration and marketing.

A strategic buyer or financial investor initiates a roll-up by acquiring a well-positioned trade business as a platform. The systematic target sourcing process then begins, identifying further businesses that meet the predefined criteria – revenue, type of business, geographical location.

Once acquired, these businesses are integrated into the platform. Administration is centralised, materials and equipment are purchased on better terms, and marketing activities are pooled. In this way, a collection of individual businesses becomes an efficient, scalable and valuable corporate entity.

Conclusion: target sourcing as the key to success

The roll-up model offers enormous potential to accelerate value creation in fragmented markets. The critical prerequisite for this is systematic target sourcing. ProxDeal automates this essential process and lets you identify potential acquisition targets with data-driven precision. By focusing on the core driver of success, ProxDeal positions itself as a strategic tool that optimises the entire acquisition process, thereby accelerating sustainable value growth.

Frequently asked questions