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The Roll-Up Economy: How Private Equity Is Monopolizing Everything

From cybersecurity to plumbing, private equity uses identical playbook to consolidate fragmented industries. The result: higher prices, reduced competition, and consumers paying for financial engineering.

Chris Groves

Chris Groves

— 8 min read
Private equity executive manipulating puppet strings attached to small businesses being consolidated into a corporate platform, cyberpunk aesthetic, 90s anime style

Your plumber, your vet, your dentist, and your cybersecurity vendor have something in common: They're probably owned by the same private equity playbook.

Not the same firm. The same strategy. It's called a roll-up, and it's being applied systematically across every fragmented industry in the economy. The product doesn't matter—plumbing, pet care, cybersecurity, dental work—it's all just EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization—a measure of cash flow) to be arbitraged.

Here's how it works. Here's why consumers pay the cost. And here's why regulatory gaps make it nearly impossible to stop.

The Roll-Up Playbook: Financial Engineering at Scale

Private equity firms have a proven formula for consolidating fragmented industries. The mechanics are straightforward, and the math is compelling:

  1. Buy a platform - Acquire one larger, established business at 5X EBITDA
  2. Acquire bolt-ons - Purchase multiple smaller competitors at 3X EBITDA
  3. Consolidate operations - Combine back-office functions, eliminate redundancies
  4. Extract value - Increase pricing power through reduced competition
  5. Exit at premium - Sell the consolidated entity at 7X+ EBITDA

A typical example: A PE firm buys a platform with $5M EBITDA for $25M (5X multiple), then acquires 5 bolt-ons with $1M EBITDA each at $3M each ($15M total). Total investment: $40M. The combined entity has $10M EBITDA and sells at 7X for $70M—a 75% return driven primarily by multiple expansion, not operational improvement.

The value creation is mathematical, not operational. You're not paying for better service. You're paying for the valuation arbitrage that created the monopoly.

Pattern Recognition: The Same Story Everywhere

Cybersecurity: The Mature Consolidation Model

The cybersecurity industry shows what mature consolidation looks like. In 2025, the sector saw 420+ M&A deals with total disclosed values exceeding $84 billion—a 10% increase over 2024. Eight acquisitions exceeded the $1 billion threshold, including Google's $32 billion acquisition of Wiz and Palo Alto Networks' $25 billion acquisition of CyberArk.

The market has shifted from "buying growth" to "buying cash flow". During 2022-2024, buyers pursued high-growth startups, often accepting unprofitable targets in exchange for 50%+ annual growth rates. That era has ended. Now it's about strategic consolidation and platform density.

Gartner predicts that by 2026, 70% of organizations will consolidate cloud security vendors to a maximum of three. Vendor sprawl is a real problem that consolidation solves. But the end state is still market concentration and pricing power for the remaining mega-vendors.

Home Services: Infrastructure Monetized

Private equity has purchased nearly 800 HVAC, plumbing, and electrical companies since 2022. The target market is massive: $657 billion in annual revenue in the U.S. alone, with over 100,000 HVAC companies, plus similar numbers for plumbing and electrical.

Deal structures are lucrative: A typical transaction offers $50 million for a family outfit with $5 million in cash flow (10X multiple). Most deals fall in the 8-12X EBITDA range, with premium platforms commanding 12-15X multiples. For context, Morgan Stanley's PE arm acquired Sila Services (HVAC/Plumbing) in 2021 and is reportedly seeking a $1.5 billion valuation—approximately 15X EBITDA.

The residential HVAC sector is midway through its consolidation cycle, while commercial HVAC is still in early stages. PE buying activity picked up significantly in early 2025. When your pipes burst at 2 AM, you'll increasingly be calling a PE-backed platform, not a family business.

Veterinary Care: When Urgent Need Meets Market Power

The veterinary consolidation story illustrates what happens when PE targets services with inelastic demand. Private equity and corporations now control 30-50% of all U.S. vet clinics, up from less than 10% a decade ago. For specialty practices like cardiology, oncology, and emergency services, 75% are under corporate/PE control.

The investment volume is staggering: From 2017 to 2023, investors poured $51.6 billion into the veterinary sector, adding another $9.3 billion in the first four months of 2024.

Consumer impact has been severe. Since 2014, prices for veterinary services have risen 60%, with more recent data showing a 32% increase from March 2020 to March 2024. The roll-up strategy has resulted in price hikes up to 100% in some cases. Consumer spending jumped from $31 billion in 2020 to $38.3 billion recently—a 24% increase.

Quality concerns have emerged alongside pricing pressure. Veterinarians at PE-owned practices report being overworked and pressured to upsell patients on expensive tests and procedures. A 2013 congressional investigation found these organizations created a system that "places profits before patient care."

Dental Practices: The Healthcare Pattern

Dental care shows similar dynamics. PE affiliation among dentists nearly doubled from 6.6% in 2015 to 12.8% in 2021. The sector saw 161 PE deals in 2024—the highest number of any healthcare industry.

Research shows that PE-owned dental offices increased charges by 3.3% following acquisition. More significantly, practices shifted from diagnostic and preventive procedures to generally higher-reimbursement restorative, specialty, and surgical procedures—a textbook example of optimizing for revenue rather than patient outcomes.

Cannabis: Proving It's Not About "Essential" Services

The cannabis industry demolishes the assumption that PE only targets essential services. Recreational cannabis isn't infrastructure. Yet 10 public companies each hold more than 100 licenses (some over 200), operate in as many as 22 states, and report quarterly revenues exceeding $300 million each.

Consolidation through M&A has been worth billions, with multi-state operators focused on consolidation and cost cutting while smaller operators find competitive niches or shut down. Former Massachusetts Cannabis Control Commissioner Shaleen Title released a report warning of the growing monopoly problem in cannabis.

The real targeting criteria aren't about essential services. They're about:

  1. Fragmented industry (many small players)
  2. Recurring revenue potential
  3. Regulatory barriers that PE can navigate better than small players
  4. Scalable operations (repeat playbook across locations)

Every industry meeting these criteria is a target.

The Infrastructure Problem Nobody's Discussing

Here's what connects cybersecurity, home services, veterinary care, dental practices, and healthcare: These are infrastructure-level services. You can't opt out. When your pipes burst, your pet needs emergency care, or your security vendor goes down, you need service now. The market doesn't work when:

  • Services are geographically constrained
  • Need is urgent or emotional
  • Switching costs are high
  • Information asymmetry is massive

PE exploits these dynamics. Roll up the local providers, eliminate competition, then charge what the market will bear. And "what the market will bear" is higher when alternatives have been systematically eliminated.

We regulate utilities as natural monopolies because infrastructure concentration is inevitable and harmful. We're seeing utility-style concentration without utility-style regulation.

The Professionalization Myth

PE firms pitch sellers on "professional management," "technology investment," and "improved operations." These benefits sometimes exist initially. But the trade-offs are rarely discussed:

Professional autonomy and service quality are traded for "professional management" that means revenue optimization. In healthcare, PE-acquired nursing homes showed higher mortality for lower-risk patients, likely from decreased staffing, reduced patient mobility, and increased use of antipsychotic drugs.

Better wages at consolidated entities—a claim PE firms emphasize—doesn't address market concentration harm. A monopolist can pay workers well and overcharge customers. Both can be true. Higher wages funded by higher consumer prices isn't exactly a public benefit.

The Regulatory Gap Is the Business Model

Here's why roll-ups work: Small acquisitions (plumbing company A, dental practice B, vet clinic C) each fall below Hart-Scott-Rodino (HSR) antitrust reporting thresholds. By the time anyone notices, the market is consolidated.

The FTC and DOJ recognized this problem in May 2024, launching a joint Request for Information seeking public input on serial acquisitions and roll-up strategies that have led to consolidation harming competition. The agencies admit these deals often go unreported, "allowing firms to amass significant control over key products, services, or labor markets without government scrutiny."

In January 2025, the FTC secured a landmark settlement with private equity firm Welsh Carson over anticompetitive acquisitions through its portfolio company U.S. Anesthesia Partners (USAP). The case alleged Welsh Carson engaged in acquisitions to suppress competition and drive up prices for anesthesiology services across Texas.

The settlement requires Welsh Carson to obtain prior approval for certain future investments in anesthesia anywhere in the U.S. and give advance notice of certain deals involving hospital-based physician practices nationwide. It's a precedent, but it's reactive—the harm already occurred.

Legislative Response: Too Little, Too Late?

Senator Elizabeth Warren has led efforts to address PE consolidation. In October 2024, she reintroduced the Stop Wall Street Looting Act, comprehensive legislation to fundamentally reform the private equity industry by forcing PE firms to take responsibility for the outcomes of companies they acquire.

Warren has also targeted specific industries: In June 2024, she introduced the Corporate Crimes Against Health Care Act to root out corporate greed and PE abuse in healthcare. In November 2024, she and Senator Blumenthal opened investigations into PE and corporate impact on veterinary care.

Legislative proposals exist. Enforcement is increasing. But the pace of consolidation far exceeds the pace of regulatory response. Small business owners face a prisoner's dilemma: Sell to PE (get paid, contribute to consolidation) or don't sell (watch competitors sell, then compete against consolidated platforms with more resources). Individual rationality produces collective harm.

What Happens Next

The pattern is clear and consistent across industries:

  1. Fragmented market attracts PE capital
  2. Roll-up strategy consolidates the market
  3. Competition decreases
  4. Prices increase
  5. Quality concerns emerge
  6. Regulators investigate (after the fact)

Your industry is probably next. If it's fragmented with recurring revenue and scalable operations, it's a target.

The uncomfortable question isn't whether PE firms provide capital and professional management—they do. It's whether those benefits justify the trade-offs: reduced competition, higher consumer prices, loss of professional autonomy, market concentration, and quality concerns.

Who decides? Currently, PE firms decide (they have the capital). Not consumers. Not workers. Not regulators, mostly.

This isn't anti-capitalism. It's asking whether specific regulatory frameworks are needed for specific industries. We regulate utilities. We regulate banking. Maybe we need to regulate infrastructure services consolidation before every essential service is optimized for financial engineering returns rather than service quality and access.

The FTC's 2024 inquiry and 2025 Welsh Carson settlement suggest regulators are paying attention. But closing the reporting gaps, implementing retrospective review of past roll-ups, and developing industry-specific protections requires more than attention. It requires action.

In the meantime, when your next vet bill doubles or your local plumber is replaced by a PE-backed platform, you'll know exactly why.

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Sources

Cybersecurity Consolidation

Roll-Up Strategy Mechanics

Home Services Consolidation

Veterinary Care

Dental Practices

Cannabis Industry

Healthcare Impact

Regulatory Response

Legislative Action

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