Buy & build
Acquisitions as a growth strategy.
A buy & build strategy can play a crucial role in your company’s growth ambitions. By acquiring and integrating complementary businesses, you can create a larger and more competitive enterprise. With this, you can achieve greater synergy and greater efficiency that are often not feasible for the companies individually. Hogenhouck helps entrepreneurs with a well-defined buy-and-build strategy and finding the perfect match for your growth ambitions. Want to know what a buy & build strategy can add for you and your business? we are more than happy to discuss this with you.
When is a buy & build strategy
worth considering?
Before you start thinking out a buy & build strategy, it makes sense to have a good picture in advance of a number of important issues such as the market position of your company, whether there are valuable acquisition candidates, the state of your company’s financial stability and the quality of your management team. We have established a strong track record in advising entrepreneurs with positioning and a realistic buy & build strategy. We are happy to share our knowledge and experience to guide you through a successful buy & build strategy.
What is the added value of
buy & build?
A buy & build strategy will be successful if the value of the combined company is more than the value of the individual companies added together; this is often summed up in the M&A world in the phrase “1 + 1 = 3.” The following aspects are important to achieve such value creation:
Accelerated growth
By acquiring other businesses, your company’s sales grow faster than is possible organically. In addition, other benefits provide opportunities for accelerated growth such as the expansion of your customer base, up- and cross-selling opportunities, greater geographic reach and options for product and service diversification.
Upselling and cross selling can substantially improve a company's margins.'
Margin improvement
By combining businesses, economies of scale can be realized that can significantly improve your company’s (profit) margin. Perhaps you can get volume discounts from your key suppliers, you need fewer people to achieve the desired sales, certain functions can be used more efficiently, or you can work more efficiently by purchasing new technology. These are all examples of economies of scale that you could realize with a buy & build strategy.
Multiple arbitrage
As a larger and more diversified company, your business is usually valued higher than the smaller acquisition candidates you have your eye on. This is often expressed as so-called “multiple” for business valuation. After an acquisition, your acquisition candidate’s multiple grows to the level of your company. The difference between the two multiples and the resulting increased valuation of the acquisition candidate is referred to in finance as “multiple arbitrage
Multiple expansion
Effecting the buy & build strategy will make your company bigger and more diversified. The company’s risk profile decreases because of, for example, the larger customer base, the lower dependence on certain employees and the increased quality of your product and services. This has a positive impact on the multiple that people are willing to pay for your business compared to buy & build; this is called “multiple expansion.
A buy & build strategy
Know what you are getting yourself in for.
Is a buy & build strategy always advantageous? Needless to say, a buy & build trajectory is not always a walk in the park, but it does offer numerous opportunities. You just have to think carefully about whether it suits you. While not every entrepreneur has ambitions to manage a larger company, it is important to recognise that doing so may well be a logical step for business growth. As an entrepreneur, it is crucial to choose what best suits you and what motivates you.
Why
private equity?
One form of risk diversification in a buy & build process is to partner with a private equity firm. By doing so, you spread the financial risk and get knowledge on board from a party that has dealt with this before. Private equity firms can help you further define your buy & build strategy, the acquisitions and integration of the acquired companies. There are two main categories for partnering with a private equity firm in the buy & build strategy:
Private equity platform
Private equity firms are always interested in new platform investments. These are companies with a strong financial profile, good management and a leading market position. If you, as an entrepreneur, want to set your own course and have a clear vision of how you want to shape a buy & build, you probably prefer to act as a platform for further expansion of your business.
Private equity add-on
Another form of involving private equity in the buy & build strategy is to join an already existing platform. In doing so, you can already gain immediate synergy and efficiency benefits with the other companies in the group and elevator in the value creation of the platform as a whole. In this case, your company acts as an add-on investment.
What do we want to do for you?
Do you think a buy & build strategy could be interesting for the next step for you and your company? If so, we would be happy to talk to you about that. We are an entrepreneurial and independent m&a firm, where you as a client always come first. Our mission is to elevate entrepreneurs who are building their life’s work, on a professional as well as a personal level.
We unburden you as much as possible so you can keep focus on your business and strategy and as little as possible with the execution of the buy & build process. We have guided many buy & build processes in a variety of industries, for different types of entrepreneurs and companies. With our extensive experience, we are your sparring partner and together we will look at how a buy & build strategy best fits your personal and business ambitions.
