Buy-and-build deals (in which a PE firm buys a company and then builds up that “platform” with add-on acquisitions) can both accelerate revenue growth and drive margin expansion by realizing synergies. Furthermore, buy-and-build strategies can create market expectations of continued growth and margin improvements in portfolio companies, which can translate into higher exit valuations. Carve-outs, on the other side, enable companies to capitalize on parts of their businesses that no longer fit strategic goals – while streamlining operations, paring costs, and enabling more-nimble responses to market shifts.
Our approach towards buy-and-build is unique since we intend to tailor it based on funds. Generally speaking, we follow a 5-step approach, including strategic review, target identification and screening, due diligence, post-merger integration and sustainable value creation. We tailor our approach based on funds since we want in buy-and-build deals extracting most value creation for the funds, either through traditional synergy levers such as scale effects in procurement and in selling, general, and administrative expenses, or from improved sales force effectiveness and pricing.
For a carve-out deal, depending on the deal complexity, the process generally consists of the program setup (~1-2 months), program design and planning (~2-3 months), and program execution (~3-6 months). In the program setup, we define carve-out scope and perform initial carve-out assessment in order to develop the details of the program and the blueprint. In the program design and planning, we perform a comprehensive carve-out issue identification in order to design interim operating models, especially the TSA (Transitional Service Agreement) and the associate pricing, and we also develop implementation plan. In the program execution, we develop and implement country roll-out plans and we transfer people, assets, contracts etc. We finalize service agreements and implement delivery capabilities, and we implement interim organization and process and legal entity setup.