Laying the foundations for a buy-and-build strategy 

Our article in Real Deals examines how to successfully execute a buy-and-build, from origination of targets, research requirements and avoiding the potential pitfalls of these deals. At Armstrong, we have supported a number of successful buy-and-build acquisitions and are seeing more funds using this approach. A big challenge for PE teams currently is deploying dry powder, and achieving sufficient returns in a market with high entry multiples.  

In a buy-and-build play, more capital can be put to work through the hold period by making bolt-ons and driving down the average multiple. Platform opportunities for ‘traditional’ roll-ups are getting hard to find, meaning funds will need to think about how they create value using buy-and-build. A successful buy-and-build strategy will optimise the ‘sum of the parts’ by adding new geographies, services, cross-selling, and creating efficiencies to reduce costs; all of which contribute to the bottom line.

Common factors of a buy-and-build strategy include: 

• A fragmented market with small private local businesses 
• An opportunity to reduce costs through efficiencies while growing top line revenues through cross-sell 
• New complementary services, geographies and/or customer sets 
• Vertical integration 
• Less reliance on underlying market growth and / or winning market share (often in relatively mature markets where customer acquisition costs are high)
• Improvements to the business e.g., sales capacity, new hires, technology, and clear customer and supplier relationship plans 

Speak to a member of the team about your buy-and-build strategy.