By Lou Sokolovskiy
Over the past several years, private equity firms have transformed the business of American healthcare and services. In specialties ranging from dermatology and dental to HVAC and pest control, investors have pursued an aggressive strategy of consolidation — acquiring smaller, independently owned companies and integrating them into larger, centralized platforms.
This roll-up strategy has thrived in fragmented industries where operational scale, shared back-office systems, and professional management can quickly increase margins and enterprise value. In 2024, healthcare deals accounted for 42 percent of all U.S. middle-market M&A activity, with total transactions up 57 percent year-over-year. The trend is similarly visible in residential services, where demand is strong, providers are local, and technology has been slow to penetrate.
Yet as the pace of acquisitions accelerates, the path forward is becoming more complex. Several converging pressures — including regulatory scrutiny, cost inflation, operational strain, and market saturation — are forcing a strategic shift in how roll-ups are executed, financed, and scaled.
A Maturing Playbook
The logic behind roll-ups has long been consistent: establish a platform company in a fragmented market, then bolt on additional businesses to build scale, expand geography, and enhance margins. The model has been especially attractive in sectors that offer steady cash flows, recession resistance, and opportunities for back-office streamlining.
But after a decade of aggressive consolidation, saturation is now a growing concern. In specialties like dental and veterinary care, many of the most attractive independent practices have already been acquired. Valuations for remaining targets have risen, compressing returns and making post-acquisition integration — always a challenge — more critical than ever.
Though add-ons have slightly gone down this year so far, it still remains strong at 51%. The decline coincides with a rise in complexity. Platforms must now manage more diverse operations, align clinical or service standards across regions, and standardize technology across business units. At the same time, buyers face a more competitive environment, driving acquisition multiples higher and leaving less room for margin expansion.
Regulatory Attention Increases
Federal regulators have begun to take notice.Federal regulators have begun to take notice. In March 2024, the Federal Trade Commission and the Department of Justice opened a formal investigation into the growing number of acquisitions by private equity firms—particularly those that fall below federal antitrust (Hart-Scott-Rodino (HSR) Act) reporting thresholds. The inquiry centers on whether the cumulative effect of these so-called “roll-up” strategies, even when targeting small medical practices, may be distorting competition or driving up prices in local and regional markets.
The heightened regulatory scrutiny is reshaping dealmaking in the sector. Transactions that once sailed through with minimal oversight are now subject to far greater examination, especially in markets where a handful of investors are rapidly building dominant positions. As a result, firms are taking a more cautious approach, undertaking deeper antitrust analyses and factoring in geographic concentration as they weigh future acquisitions—even those previously considered too small to trigger federal review.
Technology and Operational Sophistication Take Center Stage
As the financial and regulatory calculus shifts, many platform companies are investing heavily in technology and operational infrastructure. AI-assisted scheduling, billing automation, customer relationship management (CRM), and analytics tools are being deployed to reduce administrative overhead, improve service delivery, and identify bottlenecks across growing networks.
In healthcare, these technologies can help manage clinical workflows, automate revenue cycle operations, and improve patient engagement. In residential services, field service management platforms are enabling real-time technician dispatch, predictive maintenance, and mobile quoting.
What began as a strategy to build scale is now evolving into a race for efficiency and sophistication. Platforms that can demonstrate integrated systems, consistent service quality, and margin resilience are more likely to attract financing and command higher valuations at exit. The focus is shifting from the number of acquisitions to the quality of integration.
Looking Ahead
The roll-up strategy remains a dominant force in middle-market private equity. (To develop a successful roll-up strategy, we suggest reading the five critical factors by Andy Silverman of Parkway Capital.) The opportunity to consolidate and professionalize highly fragmented sectors continues to attract capital. However, the nature of that opportunity is changing.
Increased regulatory oversight, higher seller expectations, and growing operational complexity are forcing sponsors and lenders to approach roll-ups with more discipline. Integration is no longer a post-closing consideration — it is central to the investment thesis. At the same time, platforms must be prepared to differentiate themselves not just through scale, but through operational excellence and compliance readiness.
As the market moves from fragmented to formal, the next generation of successful roll-ups will likely be those that focus as much on building durable, tech-enabled infrastructure as they do on closing the next deal.
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Aug. 2025
Note: This piece was written in June 2025 and includes trends and developments through mid-year.
