Five Top Tips for a Successful Buy and Build Strategy

Many companies are turning to buy and build strategies as a way to grow rapidly, improve market share, and increase profitability.

This approach involves acquiring smaller companies and integrating them to achieve synergies, expand capabilities, or broaden market reach. However, executing a buy and build strategy effectively requires careful planning, solid execution, and a clear vision.

As lawyers, we help advise clients on buy and build strategies all year round, and here are our top tips.

1. Define Clear Objectives

A buy and build strategy should always start with a clear set of objectives and a well-defined vision.

Having clarity on the purpose behind each acquisition helps select targets that fit strategically with the goals. Purchasers should ask themselves why they are pursuing this strategy: is it to enter new markets, reduce competition, or acquire new technology and talent?

Acquiring a business without a clear plan for it, and its integration into the rest of the group can be a recipe for disaster.

2. Consider the Due Diligence Process

Due diligence is crucial in any acquisition, but buy and build strategies may require a more streamlined and efficient process to ensure that transactions can be completed quickly, and at low cost.

Whilst detailed due diligence is vital, purchasers completing buy and build strategies often focus due diligence, more than usual, on the areas of the business which are most important.

For example, purchasers may wish to complete detailed due diligence on valuable commercial contracts, but might be willing to take more risk in respect of employment due diligence, and therefore may complete only a high level review of employment matters.

3. Develop an Integration Plan Early

One of the biggest challenges in a buy and build strategy is the successful integration of acquired businesses.

Without an effective integration plan, the value of the acquisition can be quickly eroded if people leave due to a lack of motivation, or if key customers feel the larger entity does not provide the same benefits (or increase them).

4. Ensure Capital Allocation and Financial Stability

Executing a buy and build strategy will usually require significant capital, as well as pre-planned structures that allow consideration to be deferred. Financial stability is critical.

Each purchaser will need a well-thought-out plan for capital allocation to ensure funds are available for both acquisitions and integration.

Having a stable financing base and structure can also allow purchasers to agree the most preferable price and other terms with a seller for acquiring a business, and then to move quickly.

5. Culture and Operational Synergies

Building a scalable culture that aligns with the vision is essential, as integrating different corporate cultures can be a challenge.

Often there can be a conflict between minimising costs to maximise profitability, and ensuring importantly that a good culture can develop.

Summary

A buy and build strategy can be a powerful way to accelerate growth, but it of course has its specific challenges.

As experienced advisers to businesses pursuing such strategies, we provide clients with practical guidance throughout the process, for further information on how we can support you with matters relating to the above, please contact a member of our corporate team or submit an enquiry form, below.