The buy and build private equity Europe has witnessed in recent years reflects a fundamental strategic shift — with firms using platform acquisitions and bolt-on investments to generate returns where organic growth alone cannot deliver. As global markets grapple with uncertainties, private equity firms are strategically adapting to the changing environment. One notable trend that has emerged is the increased emphasis on buy-and-build acquisitions by portfolio companies.
The Buy-and-Build Phenomenon
Buy-and-build strategies involve acquiring smaller companies and integrating them into existing portfolio businesses. This approach allows companies to expand their market presence, achieve synergies, and enhance operational efficiency. Despite broader market slowdowns, European private equity players have doubled down on this strategy, demonstrating resilience and adaptability.
Key Findings
- Robust Performance: According to half-yearly data from the Centre for Private Equity and MBO Research (CMBOR), European private equity firms supported their portfolio companies in executing 369 bolt-on acquisitions during the first half of 2023. This figure represents the third-highest H1 acquisition count on record.
- Post-Pandemic Trends: The pandemic-induced economic disruptions have created unique opportunities. As valuations dipped and motivated sellers became scarce, private equity firms seized the chance to consolidate market share through acquisitions. The trend of sponsor-backed companies pursuing buy-and-build strategies persisted, with average deal values slightly increasing compared to the previous year.
- Industry-Wide Pivot: Private equity firms actively participated in this shift. Seeing numerous bolt-on acquisitions in H1 2023, these transactions spanned various European regions, emphasising the widespread nature of the industry-wide pivot.
Challenges and Opportunities
While buy-and-build strategies offer immense potential, they also come with challenges. Integration complexities, cultural alignment, and operational synergies require careful management. However, private equity firms recognise that these strategic moves can drive long-term value even in uncertain times.
Conclusion
As the European buyout market faces headwinds, private equity firms continue to innovate. The buy-and-build approach remains a powerful tool for growth and resilience. By strategically deploying capital and operational support, these firms position themselves for success in an ever-evolving landscape.
Working with a PE or VC-backed business and looking to strengthen your leadership team? Find out how HMN Capital can help or get in touch directly.
