Autori: Gervasoni, Anna, Lertora, Michele
Titolo: Buy-and-build strategy: Evidence from a survey of Private Equity General Partners
Periodico: Sinergie
Anno: 2024 - Volume: 42 - Fascicolo: 124 - Pagina iniziale: 233 - Pagina finale: 251

Frame of the research: Private equity (PE) general partners (GPs) are increasingly active in ‘buy and build’ (B&B) strategies, in which a portfolio company serves as a ‘platform’ to make other acquisitions (‘add-on acquisitions’) to accelerate the portfolio company’s growth. However, this topic so far has received limited attention from the academic community. Purpose of the paper: The study aims to contribute to the academic literature by confirming some preliminary empirical results and adding new knowledge on PE investors’ strategic approach and on the strategy’s outcomes. Methodology: We designed a survey that was administered to 77 PE investors with combined assets under management of more than €1.1 trillion. Findings: A B&B strategy’s potential entails an ex ante strategic decision that PE investors evaluate before acquiring a new portfolio company. PE investors combine add-ons to the platform to create a bigger group and enhance value mainly through multiple arbitrage, i.e., buying at a lower EBITDA multiple than the realised multiple at exit. Add-ons are smaller firms and usually are active in the same industry as the platform; therefore, a B&B strategy is akin to a horizontal M&A strategy. Research limitations: We discuss whether GPs in the study might have been incentivised to report overly positive or otherwise inaccurate responses to present a more positive industry image to stakeholders, which could have affected our findings. Practical implications: Our findings are relevant for entrepreneurs, limited partners and GPs when they benchmark their strategies, and for other players in the mergers and acquisitions (M&A) industry in terms of industry consolidation practices. Furthermore, this work identifies some benefits and drawbacks of the B&B strategy in guiding policymaking. Originality of the paper: This paper provides new insights that advance understanding of the B&B strategy, leveraging primary data surveyed directly from market participants. This is particularly relevant for the PE industry, which has limited disclosure requirements, leading to little publicly available information.




SICI: 0393-5108(2024)42:124<233:BSEFAS>2.0.ZU;2-7
Testo completo: https://ojs.sijm.it/index.php/sinergie/article/view/1671/981

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