Build-Up (Add-On Acquisition)

A build-up strategy — or buy-and-build — is a private equity investment approach in which a platform company (the initial LBO target) is used as a foundation for a series of add-on acquisitions of smaller, complementary businesses, with the objective of creating a larger and more valuable entity at exit. The build-up is one of the primary value creation levers in PE mid-market, allowing funds to benefit from multiple arbitrage (buying smaller companies at lower multiples and selling the consolidated entity at higher multiples) in addition to operational and leverage value creation.

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The add-on acquisition process follows a disciplined sourcing methodology: identification of target criteria (geography, product line, client base), proprietary or semi-proprietary deal sourcing, independent valuation of each add-on, financial due diligence, and post-acquisition integration planning. Each add-on must create clear synergies — cost (shared infrastructure, procurement) or revenue (cross-selling, new geographies) — to justify the acquisition premium.

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In the Franco-Swiss context, build-up strategies are particularly relevant in fragmented sectors: business services, specialised distribution, financial advisory, healthcare, and engineering. The combination of French and Swiss businesses in a single platform creates bilateral synergies — Swiss regulatory expertise + French commercial scale — that can command a significant premium at exit.

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Example: a PE fund acquires a Swiss insurance broker (platform) at 7x EBITDA. Over 4 years, it completes 3 add-on acquisitions at 4–5x EBITDA (a 2–3x multiple arbitrage). The consolidated group, now the 3rd largest independent broker in French-speaking Switzerland, is sold at 9x EBITDA — generating a blended 2.8x equity multiple for the fund.

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At Hectelion, we support build-up strategies through our M&A advisory and valuation capabilities, providing acquirers with independent assessments of add-on targets.