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You might have come across the term in newspapers or on private equity fund websites: Buy & Build. This refers to a well-known strategy in private equity to create value by combining multiple companies into a larger group and subsequently selling that group at a premium.
Scaling up
In its most basic form, a buy & build strategy involves acquiring and integrating multiple companies within a specific sector into a single enterprise. This is often done to capture the benefits of scale, such as shared IT systems and centralized administration.
In practice, there are several variations. Often, a company with scale and a strong brand position is used as the foundation of the group. This company is referred to as the “platform,” while the companies that are added are known as “add-ons.” Another variation involves acquiring complementary businesses to build a vertically integrated value chain rather than combining similar companies.
Strong brands
When executing a buy & build strategy, investors must make key decisions, particularly around integration and management. Will existing brand names be retained? Will companies continue to operate independently?
The answers vary by sector and situation. A well-known example is the software group Visma. With the support of private equity, this originally Norwegian company has acquired dozens of software businesses. These companies often retain their own brand and management, while benefiting from shared services such as HR, development and sales infrastructure. This allows them to leverage the scale and network of the broader group.
Investing in private equity is possible at Marktlink Capital starting from €250,000. Want to know more? Then contact our team.
