Platform It! How to Execute a Roll Up Strategy and Unblock the Path to Liquidity
A "liquidity-blocked" company is one where the owners or investors struggle to exit due to structural challenges—they’re too mall for private equity, a messy cap table, or low growth and too much profitability block investor liquidity. Many of these companies are stable and profitable, but they lack a clear pathway to monetize equity.
For liquidity-blocked companies, four primary options exist:
Sell It – Accept a lower valuation and exit.
Platform It – Transform the business into an acquisition platform.
Founder Buyout/Recapitalization – Put debt on the business and buyout angels and / or institutional investors.
Direct List on OTC Markets – In collaboration with a robust investor relations program, gain public-market liquidity at a lower compliance burden.
In this article, we’ll explore the “Platform It” strategy in depth—how it works, why it can unlock substantial value, and when it makes sense to pursue.
The 'Platform It' Strategy: Turning a Standalone Business into an Acquisition Vehicle
Instead of selling today at a low multiple, the company transitions into a Platform for rolling up similar or adjacent businesses. This approach allows it to acquire smaller SaaS companies at low multiples, integrate them, and exit at a higher valuation.
Key Features of the Strategy:
Compelling Product-led Vision — Go beyond financial engineering and create a multi-year vision for how horizontal, vertical and competitive acquisitions fit together and will create more value for customers.
Disciplined Acquisitions – Acquire lower growth targets at break-even or better where revenue growth will exceed OpEx growth over the holding period. Ensure that cost synergies worth at least 10% of OpEx can be achieved within 6 months.
Multiple Vectors for Value Creation –
Organic EBITDA growth at acquired companies should organically grow faster than revenue
Cost synergies provide downside protection
Multiple expansion is possible as individual assets acquired at ~3x revenue can be worth 5-6x in a larger platform
Investor & Debt Backed Growth – Provide new preferred equity investors with a PIK return (eg, 8%) plus participation. Boost equity returns with a 60% equity / 40% debt structure to finance acquisitions.
The Platform company benefits from pro-rata participation and the Sponsor Promote – The platform company serves as the sponsor. When the company is sold after the acquisitions, the company’s original investors receive proceeds from their pro-rata participation and earns a 20% promote.
How Value is Created: An Example Roll-Up
Let’s work through a hypothetical example. A liquidity-blocked SaaS company with $5M revenue and $1M EBITDA is expecting to grow at a 5% annual rate. VCs are not interested in this growth profile and it’s too small for many Private Equity shops. Running a process to sell the business today might result in a 3x revenue multiple, or a $15M Enterprise Value (“EV”).
Most importantly, the founders and existing investors are aligned on a roll-up strategy — they want to Platform It! The founders have created a compelling product-led vision for consolidating horizontal, vertical and competing companies into a larger platform. They have completed exhaustive market research and understand all potential targets and have target-specific strategies on how to reach out and engage with each company.
Lastly, they understand the specific financial criteria that each target company must meet:
The entry multiple must be <=3x (implies low revenue growth)
They must be break-even or better, cost synergies must exist
They must believe EBITDA can organically grow as revenue growth exceeds OpEx growth
As a result of their research, they expect acquisitions to be between $5M and $10M in revenue with growth between 3% and 10%
Note: I’ll skip the stress, pain and anguish of sourcing, closing and integrating 5 transactions in 5 years.
Using the strategy outlined above, the company becomes a Platform and completes 5 acquisitions over the next 5 years, adding $39M in revenue and $9M in EBITDA by Year 6.
As shown above, they raise $65M in preferred equity and $44M in debt to finance the acquisitions. The average entry revenue multiple is 3x and the average EBITDA multiple, including the cost synergies is 14x. The Debt Service Coverage Ratio (“DSCR”) of the entire company is 1.6x, demonstrating the (somewhat) aggressive use of leverage at an 11% interest rate.
Assuming the original Platform company grew its own business to ~$6M in revenue (5% CAGR) and maintained its 20% margin, the combined company has this P&L when it is time to run a process to sell the combined Platform.
Above values have been truncated for cleanliness.
The company is now 9x larger on a revenue basis and far more interesting to much wider range of buyers, which should result in value creation through multiple expansion. That is, in this example the combined company could sell for a 5x multiple based on a rule of 30 profile of 7% revenue growth and 23% EBITDA margins. (Note: this example assumes no revenue synergies, which should be considered when acquiring companies and would increase revenue growth and further expand the multiple.)
The entire company is worth 5 x $45.4M = $227M
How does the Waterfall Allocate the $227M?
In our example the $44M in debt is paid off first, along with the $65M in preferred equity capital and a further $13M from the 8% preferred coupon. This leaves $105M in common equity.
Based on our example deal structure the common equity is allocated like so:
The Platform receives its 20% promote: $21M
The Platform receives its pro-rata portion from its own revenue contribution to the Platform. In this case it’s ~$6M is 14% of the total $45M in revenue: $15M
This means the Platform receives a total of $36M ($21M + $15M).
The preferred Investors receive the remaining proceeds: $69M
This means the Investors receive a total of ~$147M ($78M + $69M)
In Summary:
Investors receive a 2.3x MOIC ($147M total proceeds / $65M equity investment)
The Platform receives $36M, which is 2.4x greater than their expected valuation in Year 0. With no additional investment from the original company’s investors, they are effectively receiving a 6x revenue multiple on the original company’s $6M in revenue when the Platform exits.
Why 'Platform It' Works for Liquidity-Blocked Companies
Higher Exit Valuation – Rolling up multiple businesses increases scale, improving revenue and EBITDA multiples.
Investor Capital Instead of Personal Risk – External investors fund acquisitions, reducing the need for founder capital.
Sponsor Promote Creates Upside – The original Platform company and founders earn a share of excess returns.
Attracts Buyers at Exit – A larger, more profitable company is far more attractive to PE firms or strategics.
When to Use 'Platform It' vs. Other Options
Conclusion: 'Platform It' as a Path to Liquidity
For liquidity-blocked SaaS companies, rolling up smaller firms and growing into a larger, more valuable platform can create significant upside compared to an immediate sale.
Instead of accepting a suboptimal exit, consider becoming an acquisition platform and unlocking greater returns.