How does a buy-and-build strategy work?
Short Answer
You acquire a platform business, then add a series of smaller bolt-on acquisitions to it over time, compounding scale and, often, re-rating the enlarged group to a higher multiple than the parts commanded alone.
Full Explanation
Buy-and-build is a strategy for growing by acquisition through one platform and many bolt-ons. You start by acquiring a platform company — a business with the management, systems and market position to absorb others. You then acquire a series of smaller, complementary businesses (bolt-ons or add-ons) and integrate them into the platform. Two effects compound. First, scale: the group grows faster than it could organically, adding customers, capability and geography. Second, a re-rating: larger, more diversified, better-run groups often command a higher earnings multiple than the small businesses that were rolled into them, so the whole becomes worth more than the sum of the parts — sometimes called multiple arbitrage. The discipline that makes it work is repeatability: a clear thesis about where synergies come from, a standard diligence and integration process, and a 100-day plan applied to every deal. Poor integration is where buy-and-build fails, because the intangible value acquired can leak away in the transition. See [grow by acquisition](/insights/grow-by-acquisition-strategy) and the [buy-and-build strategy](/intangibles/glossary/buy-and-build-strategy) definition.
Related Glossary Terms
Related Questions
Define your acquisition thesis, build a target list, approach owners, agree heads of terms, run due diligence, finance and structure the deal, then co...
Often much less than the headline price. Acquisitions are usually funded with a mix of your own equity, bank or asset-based debt, and vendor finance, ...
Combine sources into a capital stack: your equity, senior bank debt, asset-based lending, IP-backed lending against intangible assets, and vendor fina...
Want to see these concepts in action?
Discover how Opagio Intangibles puts intangible asset theory into practice.