AI rollups might be reshaping the playbook for traditional rollups in mergers and acquisitions (M&A). Instead of simply combining similar service businesses and cutting costs, these deals are transforming how companies operate.
While rollups are not something new in the M&A ecosystem, what is being rolled up is changing as the market evolves, becoming a reflection of what investors value today and how this value is perceived, positioned, and eventually captured (aka eventually bought and operated!).
The promise behind rollup strategies is to aggregate a series of acquisitions, typically within a specific type of company or industry, to leverage synergies and scale those businesses.
But why are AI rollups happening now? And why might they be transforming the traditional rollup playbook? There are mainly three reasons, beyond the obvious hype and "what's trendy".
- First, capital is tighter, and both founders and investors are under pressure to build leaner businesses.
- Second, AI is now part of real workflows, with tangible results.
- And third (but no less important), a new wave of buyers from private equity, venture-backed platforms, and product-led tech companies is actively pursuing acquisitions where AI can meaningfully shift the economics.
In this context, founders looking to exit to a holding company or rollup player should consider how their team, technology, and roadmap fit into an AI-powered platform strategy. Understanding this value equation, which includes aspects of intelligent automation, is critical to being prepared for conversations with today’s AI rollups acquirers.
The evolution of traditional rollup strategies
Historically, rollups have been used to consolidate fragmented markets, such as dental practices, plumbing and HVAC businesses, regional IT service providers, or small businesses into larger, more centralized platforms. The goal was to scale by reducing overhead, by centralizing operations -among other things- and improving purchasing power or marketing efficiency.
In the decades before 2019, firms like Constellation Software had already pioneered a successful serial acquisition model, focusing on acquiring and holding vertical software companies with minimal integration and strong capital efficiency.
This approach laid the groundwork for a new wave of buyers. Starting in 2019, we saw the emergence of e-commerce aggregators, followed by acquirers targeting niche SaaS businesses. Over time, these players adopted strategies inspired by the Constellation model and/or Private Equity, applying rollup tactics in digital sectors to build predictable, scalable cash flows and either hold forever, or flip.
What makes AI-powered rollup strategies different
AI rollups are an evolution of this model. Instead of simply grouping similar companies, these rollups introduce a layer of transformation: applying AI across acquired businesses to improve core workflows, elevate the customer experience, and reshape the cost structure for the better. The AI can be proprietary or off-the-shelf.
Often, this means reimagining how legal services and other professional services are delivered in industries such as legal, accounting, or human resources, where human labor remains predominant.
Inside today’s rollup deals: How top buyers are moving
Entrepreneur Elad Gil is one of the biggest advocates for this new wave of AI-powered rollups.
An early-stage tech investor, Gil is now backing a strategy that combines acquisition with operational reinvention. His playbook is to acquire mature, people-intensive businesses (law firms, professional services companies) and use AI to rework their workflows.
"If you own the asset, you can transform it much faster than if you’re just selling software as a vendor. Because you take the gross margin of a company from 10% to 40% that’s a huge lift”, he explained to TechCrunch earlier in June.
Another leading example is Thrive Capital, the venture capital firm behind OpenAI, Databricks, and Stripe. In April, The New York Times reported:
"Thrive Capital is raising money for a company it has created called Thrive Holdings, which is meant to develop and buy start-ups, according to four people with knowledge of the matter. The idea is to help operate the businesses, and use the cash flow to both invest in the companies and buy up others".
One of the rollup businesses backed by Thrive is Crete Professionals Alliance (Crete PA), an accounting platform planning to invest over $500 million in the next two years to acquire U.S.-based accounting firms and integrate AI technology powered by OpenAI into these companies to improve operational efficiency, according to company executives in a statement to Reuters.
Crete Professionals Alliance, an accounting platform backed by Thrive Capital, plans to invest over $500 million to acquire U.S.-based accounting firms in the next two years, and equip them with OpenAI-powered artificial intelligence technology to boost efficiency, company executives told Reuters.
According to Reuters: "General Catalyst, another VC firm, is also creating firms that buy companies in professional services, including its accounting firm Accrual."
Marc Bhargava, a managing director at General Catalyst, said to the Wall Street Journal:
“We do think there’s a huge opportunity to rollup accounting firms and automate a lot of the workflow and let the same accounting firms take twice as many clients. The idea is not to cut people with AI, the idea is to enable them to do two to three times the work.”
Recommended: Key Tech M&A Deals From 2024-2025
Why AI rollups are accelerating now
As stated before in this article, three converging forces are fueling the rise of the AI rollup momentum:
Tighter capital markets
Investors and operators face greater pressure to build lean, cash-efficient businesses and ensure operational improvements. Traditional cost-cutting alone isn’t enough, and AI offers a path to a better structural margin and scalable growth, especially in service industries.
Mature AI capabilities
Generative AI has moved from prototype to production, and for most companies, if not all, improving processes with AI is a must.
Strategic buyer appetite
PE firms, VC-backed platforms, and product-native tech companies are pursuing acquisitions where AI integration can shift unit economics. Instead of buying for consolidation, they’re buying for transformation.
What founders should understand before selling into a rollup
A rollup may look good, especially with a strong valuation and AI-powered scale. However, founders should look beyond the top-line price and into the mechanics of the deal: how value is being allocated, how integration will work, and what role they’ll play post-close.
Today's AI rollup strategies differ from traditional service rollups in one key way: the acquirer isn’t just consolidating operations; they’re redesigning them to enhance enterprise value.
Also read: What is agentic AI, and why is it redefining SaaS Value?
Key areas to consider:
Deal structure and ownership dynamics
- Is the transaction cash, equity in the new rollup platform, or a mix?
- How much value is allocated post-close? What’s the role of earnouts?
- What rights will you have in the cap table post-deal?
- These details will impact short-term and long-term upside.
Integration and tech prioritization
Founders need to know how their software provider or services model will be merged with other portfolio companies.
- Will your product remain standalone or become part of a larger AI-enabled platform?
- Will your roadmap remain intact or be absorbed?
Strategic role and retention risk
If your team is expected to lead AI integration, negotiate around retention comp, governance rights and influence over product strategy. These post-close dynamics will determine if you’re a builder or a bolt-on.
Questions to ask potential buyers:
- What’s your AI thesis, and how does our product support it?
- Will our software or service model be preserved or reworked?
- Who’s staying in the cap table after the deal?
- How are you protecting our intellectual property post-acquisition?
Risks to consider:
- Dilution in platform equity or misalignment over roadmap direction.
- Tech de-prioritization, where your core innovation is sidelined in favor of other integrations.
- Lack of clarity around how your operational improvements will be recognized and scaled.
For founders in vertical SaaS, human knowledge work, or premium tech-enabled businesses, these nuances are especially important. What appears to be a simple rollup could be a transformation deal with implications far beyond the exit.
How buyers underwrite software companies in AI rollups
There's no perfect playbook for valuing AI-powered businesses in a rollup context, at least not yet. The reality is we are still figuring this out. This is a new category, and while the narrative has shifted, the tools used to evaluate it have often remained the same.
Most buyers are still relying on frameworks built for yesterday's markets: SaaS metrics, services multiples, and traditional diligence methods.
However, AI rollups aren’t traditional software companies or service businesses. They exist in between, or candidly, to be more accurate, they are creating their new category and space.
Until there's a standardized framework for underwriting AI integration, most acquirers revert to what they know, adapting familiar metrics to this new context:
- SaaS-style metrics like Annual Recurring Revenue (ARR), gross margin or Customer Lifetime Value (LTV) to Customer Acquisition Cost (CAC) Ratios.
- Service rollup logic, using profitability benchmarks (e.g. EBITDA margins) and playbooks for consolidating human labor models.
- Platform potential, meaning: how quickly can this company be scaled across other assets via AI deployment?
What buyers might look for in AI rollups
Even if the language of the pitch sounds new, the underlying diligence often comes down to a few core questions:
- Does the AI create structural margin expansion?
Can human labor be reduced meaningfully and sustainably, without damaging delivery quality? - Is the technology proprietary or commoditized?
Are you layering AI into your product in a defensible way, or integrating tools others can easily replicate? - How quickly can it scale?
Can your AI product or system be deployed across a portfolio of companies or verticals in a capital-efficient way?
In other words, buyers want to know if this is real automation or just a smarter front-end on a traditional cost base.
Prepare to engage with AI rollup buyers
Artificial intelligence isn’t new, and neither are large language models. What’s changed is how AI is packaged, marketed, and adopted, impacting how it is perceived and valued in today’s market
The rise of GPT models generated a shift from research and niche applications to mass adoption, marking AI’s transition from an emerging technology to a strategic imperative.
While many enterprises have already integrated AI into their operations, the shift is now in the relationship between these companies and both consumers and stakeholders, as Andrea Balletbo from L40º notes, where evolving expectations are influencing valuation and market dynamics.
This shift signals a structural change in how companies approach productivity, workflows, and digital transformation. For founders building in AI, the implications are immediate: greater opportunity, but also sharper scrutiny from buyers, partners, and competitors.
At L40°, we help AI founders evaluate strategic options, whether you're navigating inbound M&A interest, considering a structured rollup strategy, or preparing for growth-stage capital. Our experience spans both sides of the table, enabling founders to engage with discretion, precision, and leverage. Contact us.
