What is the secret behind a successful buy-and-build strategy, and which of these factors are decisive for successful integration? We asked NPM Capital’s Investment Director Bart Coopmans to answer five of our most pressing questions.
1. Some would argue that buy-and-build strategies appeal mainly to private equity firms looking to quickly increase the revenue and profitability of an equity investment so as to facilitate a successful and relatively swift exit. What is your take on this?
‘We tend to use buy-and-build strategies primarily for companies that have a scalable business model, by which I mean that increasing their scale would be disproportionally beneficial for their operations. This might be because it provides them with cross-selling opportunities (‘cross-selling’ refers to selling additional products to existing customers – Ed.), which results in quick revenue growth. Another advantage might be that the company can implement a specific technology on a larger scale – or there may be other cost-saving opportunities involved. In these cases, buy-and-build is a way to enable a company to benefit from these advantages sooner, and become a more effective and successful business in the process.’
