When considering a rollup strategy, structuring equity and control effectively can be the difference between a successful acquisition and a failed one. In this blog post, I’ll break down a proven framework for equity distribution, seller retention, and the formation of a platform company based on real-world experience. What is a Rollup Strategy? A rollup strategy involves acquiring multiple businesses within the same industry and integrating them under a single platform company to increase efficiency and market value. The goal is to create operational synergies, streamline processes, and ultimately drive a higher exit valuation for all involved parties. Structuring Equity in a Rollup One of the most common questions I receive is: “How much equity should the seller retain after an acquisition?” The key to effective equity structuring lies in balancing control while keeping the seller engaged for future growth. Here’s how I typically approach it: Key Insight: Acquiring control upfront allows you to lead strategic decisions while retaining a motivated seller who has a vested interest in the company’s long-term success. The Role of a Platform Company in a Rollup A platform company serves as the foundation for future acquisitions and integrations. Here’s how it works: Pro Tip: Even before the deal closes, positioning the acquired company as the platform company strengthens your acquisition narrative and simplifies future negotiations. Communicating Day-One Changes with Sellers A common concern from sellers is how their business will operate post-acquisition. To ease these concerns, I emphasize continuity while establishing a long-term growth plan: By positioning the acquisition as a partnership for growth rather than a hostile takeover, sellers often feel more comfortable staying involved and supporting the rollup vision. Key Takeaways for a Successful Rollup Strategy Final Thoughts A successful rollup strategy is all about balance—controlling the deal while keeping sellers engaged for

When structuring business rollup negotiations, mastering the art of strategic conversations can make the difference between closing a successful deal or facing objections. It’s about more than just presenting terms—it’s about guiding the other party toward a shared vision where they feel engaged and aligned with the outcome. Define the Outcome First Before entering business rollup negotiations or conversations, it’s essential to define your desired outcome. Ask yourself: For example, if your goal is to secure a seller’s involvement in a rollup with a 30% equity stake, build your conversation around that goal from the outset. Then, reverse-engineer your questions to gradually lead the seller toward embracing that vision. Ask Strategic Questions to Uncover Motivation Rather than stating your offer upfront, ask guiding questions that encourage the other party to reveal their own motivations. This approach builds trust and helps the seller convince themselves of the value of the deal. Sample Questions: By inviting them to share, you gain insights into their goals while subtly steering the conversation toward your desired outcome. Presenting a Term Sheet the Right Way Once you’ve identified motivations and established alignment, the next step is guiding the conversation toward a formal offer. Rather than presenting the term sheet as a final, unchangeable document, build it collaboratively. Key Tip: Develop a draft term sheet in advance that reflects the outcomes you’re aiming for, then ask targeted questions to encourage agreement on the key points. This allows the other party to feel they’re part of the decision-making process rather than having terms imposed on them. Engage Stakeholders with Inclusion When multiple stakeholders are involved, such as a business owner and their heirs, ensure you equally engage all parties. Dividing attention equally helps build rapport and ensures no one feels left out. Pro Tip: If a less vocal

Negotiating the acquisition of a business requires a balance of strategy and finesse. One approach I use consistently is an invaluable private equity hack to anchor discussions around industry standards. Here’s how I navigate conversations with sellers to set reasonable expectations and ultimately secure favorable deals. 1. Begin with Industry Standards The first step is to establish a baseline by referencing industry standards for valuation. For example, if businesses in a particular sector typically sell for 2x to 3x their profit, I make sure to present that as a benchmark during the conversation. By anchoring expectations to an objective measure, you establish credibility and shift the discussion away from inflated or emotional valuations. 2. Dive into Due Diligence Once I’ve set the industry standard as the baseline, due diligence becomes my tool for negotiating downward. As I dig into the details, I often uncover challenges that justify lowering the valuation—whether it’s operational inefficiencies, outdated processes, or unmet growth targets. These findings create a natural pathway to adjust the price while keeping the conversation rooted in the data. 3. Starting Low with the Anchor When dealing with sellers who haven’t expressed a specific valuation, I like to establish a low anchor. I’ll often say something like, “Deals like this typically sell between 1x and 1.5x profit.” This approach ensures I’m starting at a place where I’m comfortable negotiating upwards if necessary. Interestingly, many sellers have accepted this range without objection. It’s important to remain flexible, but starting low creates room for movement while anchoring expectations in your favor. 4. Responding to “Pie-in-the-Sky” Expectations If a seller begins the conversation with an overly ambitious valuation, my strategy shifts. In these cases, I still reference industry standards to gently bring them down to a more reasonable range. For example, I might say, “While