Private Equity Firms Focusing on Add-on Acquisitions

MergersPrivate equity firms are increasingly focusing on so-called add-on or bolt-on acquisitions, acquisitions that are added to existing “platform investments”.  According to Pitchbook, a service that tracks private equity transactions, in the third quarter of 2014, 61% of all private equity investments were add-on transactions compared to 57% in 2013 and  49% n 2012. Traditionally, private equity firms are thought of as “financial buyers”, but increasingly act more like “strategic buyers” when they focus on add-on acquisitions.

This trend may have several causes.  First, the current deal environment is competitive, especially for platform investments.  The competition level may be somewhat lower for add-on investments and the returns may be greater, gven for the potential for synergies with existing invesments.

Here’s a link to an article on this topic on PELog.

 

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