Buy and Build

What is a buy and build strategy?

Buy and build is a growth strategy used by private equity firms to create value through a series of planned acquisitions. It involves purchasing a well-managed and scalable platform company in a fragmented sector that shows strong growth potential. This platform is then used to acquire and integrate additional businesses, typically in the same or closely related sectors.

The strategy helps build scale, enter new markets, broaden product or service offerings, and achieve operational efficiencies.

Executing a buy and build strategy

The core aim of a buy and build approach is to accelerate growth, expand market share, and improve profit margins by forming a larger, more strategically valuable group. Private equity firms seek to generate synergies, reduce duplication, and enhance performance. When well executed, the combined entity is worth more than the sum of its individual businesses.

Success depends on deep sector knowledge, disciplined execution, and effective integration. The initial platform company is usually acquired using equity. If it performs strongly and produces reliable cash flows, future acquisitions may be financed through senior debt, allowing the equity investment to be stretched further and increasing potential returns.