What is a buy and build strategy?
The buy and build strategy is the acquisition of a company usually with a strong infrastructure and management team. These capabilities will then be used to acquire more companies in order to build and grow.
Why Buy and Build?
This strategy is attractive due to the short holding period. The typical PE (Private Equity) buy and build model requires that the portfolio companies bought be sold rather quickly with the average holding period being around 3 to 5 years. What’s the reason behind the short time frame? Most of the time the funds are invested for the limited partners in the hopes of returning the investment within a short time period. The buy and build strategy is considered a more defiant way of achieving rapid expansion and driving revenues when compared to organic growth.
Financing a buy and build is one of the key issues in the process. Sometimes it’s possible to acquire financing at the time of the initial transaction to finance all, or the majority of the consideration payable for the add-ons.
As further equity funding is often needed to acquire additional add-ons to the portfolio. C.R.E.P. has partnered with financial firms to make your goals that much easier to achieve.
To find out more about how we can get you financing please see C.R.E.P. financing.
When it comes to integrating, quite some time will be needed due to the costs and disruption involved in the integration of the new acquisitions into the group. For Example, significant redundancies or the relocation of parts in the business. When compared to standalone transactions holding periods often take longer when implementing a buy and build strategy.
Buy and Build Within Your Industry
Thanks to the access we have to various large databases as well as our network C.R.E.P. can find companies within your industry for targeting. We also have the ability to work with a variety of M&A professionals within your country of interest.
A tax efficient structure is one of the more important factors when structuring a buy and build strategy. Basically the goal is to eliminate any tax leakage on the flow of profits as much as possible. As well as any leakage on profits from investments.
There is no one size fits all answer to this as it often depends on the location of the investors ,management team as well as the location of the targeted company for acquisition.
Our team is equipped to help you with your tax structure. Feel free to contact us with any questions.
C.R.E.P. can assist in the expansion of your company within the European,African and Asian markets. We are more than capable of getting you a foothold within these markets. Our firm can assist in all achieving a tax efficient structure.
The consolidation of a particular sector and the creation of a larger enterprise which benefits from economies of scale are the 2 main goals behind the buy and build strategy.
During the selection process of a buy and build platform one needs to be confident that the companies within the targeted industry are lightly to be available for sale. However, should such companies not be for sale ,C.R.E.P has a highly skilled sales team that can approach prospective companies with acquisition proposals.
Compliance with the local competition law needs to be considered in the early stages of the selection of a buy and build platform ,getting input from from competition specialists is advised.
In conclusion the need to think long term is necessary. The consequences for the structure of financing ,the tax structure and the position of management should all be taken into account at a early stage.