Why the Roll-Up Model Is Breaking — and What Comes Next
New research is confirming what many of us have already sensed: the traditional roll-up and private equity model is cracking under pressure. What was once a seemingly foolproof playbook — buy small at 6–8x EBITDA, bundle, scale quickly, and flip at 14–18x — is now struggling to deliver on its promises.
The core issue? The math just doesn’t work anymore.
Multiples have compressed. Exit opportunities are drying up. And the whole thesis — that bigger equals better — is being tested in public markets, where investors are demanding discipline, not just size. The “buy low, roll up, exit high” strategy is running into a wall.
Public strategics no longer want to acquire platforms because it dilutes their own multiples. PE sponsors are stuck, unable to sell without taking a loss — a scenario LPs won’t tolerate. And public markets? They’re actively discounting roll-up platforms, prioritizing free cash flow and organic margin expansion over the hype of M&A-driven growth.
So the roll-up machines are shifting gears. The very platforms that once lived on deal volume are now being forced to grow organically. Some are turning to stock buybacks instead of new acquisitions. Others are slowing down completely — not because the targets are gone, but because the upside is.
This is the consequence of short time horizons. Most PE funds are built to sell in about five years. When that timer runs out, firms are forced to exit — even if market conditions aren’t right or the business isn’t ready. That kind of pressure leads to rushed sales, suboptimal buyers, and ultimately businesses getting passed from one fund to the next, with little stability in between.
At Legacy, we’re taking a different approach.
We’re not trying to out-arbitrage the market or rush to an exit. We’re building small, regional portfolios of essential service businesses with long-term, local backing — especially from debt holders who value fixed returns over flashy exits. That gives us time, flexibility, and the ability to grow the right way — with durability, not debt.
Here’s what’s happening in the real world:
Real-World Examples: The Roll-Up Squeeze
Limbach ($LMB) – Commercial HVAC
Down to 12x EBITDA (from 15x), despite strong performance. Even debt-free, M&A-based growth isn’t being rewarded.Comfort Systems ($FIX) – HVAC/Electrical
$900M+ EBITDA, $500M cash on hand, but still trading at 12–13x — down from 17–18x.Builders FirstSource ($BLDR) – Building Products
$2.2B EBITDA, trading around 9x. M&A has paused. Buybacks now seen as a better use of capital.APi Group ($APG) – Life Safety
Trading at 12–13x despite continued acquisitions. Valuation is flat — upside capped.Mister Car Wash ($MCW) – Consumer Roll-Up
Around 10x EBITDA. They’ve moved on from roll-ups to greenfield expansion for more control.Vail Resorts ($MTN) – Ski Roll-Up
$875M EBITDA, trading at ~10x. No scale premium, despite brand strength.BrightView ($BV) – Landscaping
Trading at 7.5x EBITDA with leverage. Public markets aren’t buying the roll-up narrative.DentalCorp ($DNTL) – Dental Roll-Up
From mid-teens to ~8.5x EBITDA. Acquisitions haven’t driven valuation gains.ABM Industries ($ABM) – Janitorial & Facilities
Once highly acquisitive, now trading at 9–10x EBITDA. Focus is on margins and clean operations.Rollins Inc. ($ROL) – Pest Control
Still at 20x+, but the pace of M&A is slowing. Market isn’t rewarding inorganic growth the same way.Waste Connections ($WCN) – Waste Services
Trading at ~15x, down from 18x. Shifted from deals to pricing and internal leverage.US Physical Therapy ($USPH) – Healthcare Services
At ~11–12x EBITDA. Flat organic growth and higher integration costs dragged valuation.
The message is clear: the market is rewarding substance over story.
In this environment, local scale and operational excellence matter more than financial engineering. Time-tested businesses run by people who know the market — not spreadsheets — are becoming more valuable.
And that’s exactly the kind of business we’re focused on building.
The labor market for skilled trades and essential services is under pressure. Business owners across the country are struggling to retain quality workers, manage job site efficiency, and maintain profitability. At Legacy, we believe one of the most underutilized tools for addressing this challenge is a model called Percentage Pay.
This system aligns incentives, rewards efficiency, and transforms how workers view their roles—from hourly labor to empowered ownership.
The Power of Percentage Pay
In our past experiences operating companies in the scaffolding, air quality, restoration, and structural remediation sectors, our team has seen firsthand how this system boosts both morale and performance. Now, as we grow the Legacy portfolio, we’re introducing this model across multiple labor-heavy service businesses.
So, what is Percentage Pay? It’s simple: rather than paying workers hourly, they earn a percentage of the total job value. The faster and more effectively they complete the job, the more they earn—while still protecting the company’s margins.
Why It Works
Incentivizes Efficiency: Workers aren’t just clocking in and out—they’re motivated to finish well and quickly.
Reduces Supervision Needs: With clear incentives, workers manage themselves.
Fuels Recruitment: Good workers seek out high-opportunity environments—and this model creates one.
Boosts Retention: People don’t leave when they’re making more money doing high-integrity work.
Cleans Up Company Inefficiencies: It naturally eliminates waste, time theft, and poor processes.
Real Job Site Example: Crawlspace Restoration Crew
Let’s say a crawlspace remediation job brings in $10,000 in revenue.
After allocating $3,000 for materials and equipment, the remaining $7,000 is available for labor and overhead.
The company keeps a fixed 30% for overhead and margin ($2,100), covering insurance, fuel, back-office, and profit.
That leaves $4,900 available to be paid directly to the crew.
In this case, two technicians complete the job in 1.5 days. Under the Percentage Pay model, they split that $4,900—each earning $2,450 for roughly 12 hours of work. That’s more than $200/hour each, tied directly to efficiency and job performance.
Here’s why this works:
Incentive to work smarter: They didn’t waste time running to the hardware store three times or leaving tools behind.
No need for oversight: With clear incentives and expectations, the crew didn’t need a foreman checking in every hour.
Pride and ownership: They knew that doing it right the first time, efficiently and safely, was in their best interest.
That same job, under a traditional hourly model, might’ve taken longer, required a supervisor on site, and cost the company more in total wages and overhead. Worse, the crew wouldn’t have had any reason to improve next time.
Not Just About the Pay—It’s About the Culture
The model isn't just about dollars and cents. It’s about building a culture of ownership, responsibility, and pride in craft. When paired with a clear mission (such as helping underserved clients or making homes safer), the impact multiplies. Workers aren't just earning—they’re contributing to something meaningful.
Our teams have seen it time and time again: give someone a fair shot to earn more, tie their pay to performance, and they’ll rise to the occasion. Not only does the business grow stronger, but the team grows tighter.
Why This Matters Now
In today's environment of tight labor markets, rising costs, and generational shifts in how people work, companies need creative solutions. Percentage Pay isn’t new, but it’s rare—and it works.
It gives employees the power to earn more based on performance, not seniority or hours worked. It creates clarity and shared goals. It frees up business owners from chasing hours and managing slack. And it improves margins without cutting corners.
Looking Ahead
As we continue growing the Legacy portfolio, this model will play a central role in how we help service businesses professionalize, scale, and retain their best people. We believe the future of essential services lies not just in better tools and tech—but in better ways to pay and empower the people doing the work.
It’s time to bring ownership back to the front lines.
