Buy and Build Strategy: When Founders Should Grow by Acquisition

Bolt-on acquisitions have moved from tactic to centre of the private equity market. Preqin reports that add-on acquisitions accounted for more than half of global private equity deal count during the first six months of 2026. KPMG, using PitchBook data, reports that in Europe, the Middle East and Africa (EMA) add-ons contributed a four-year high of $236.5 billion in investment across 4,219 deals in 2025, while add-on deal volume fell from the record high of 4,494 deals in 2024. The pattern is fewer, larger add-ons.

The UK sits at the centre of that activity. KPMG's data show EMA private equity investment rising from $649.3 billion in 2024 to $729.8 billion in 2025, with the UK attracting $204.6 billion across 1,862 deals, ahead of Germany at $84.9 billion, France at $84 billion and Italy at $58.4 billion (Exhibit 1). For a UK founder considering acquisitions, this means competing with sponsor-backed consolidators that have capital, advisers and a pipeline of their own.

The implication is that a founder is both a potential buyer and a potential target. A sponsor-backed rival that consolidates your sector will approach the same owners you are considering, and may also approach you. The strategic choice is therefore whether to be the consolidator or the consolidated, and the answer depends on whether your company can assemble the capital, capability and speed to lead the process in its niche.

A founder-led buyer can compete against sponsors on things sponsors cannot easily offer. Sellers who care about legacy, staff and customers may prefer an owner who knows the sector and will keep the name, the site and the team. They may accept a lower headline price for certainty and cultural fit. This advantage is genuine but narrow, and it disappears if the founder cannot show how the acquired business will be run.

The action is to map the consolidators in your sector. List the sponsor-backed groups, their recent add-ons, the targets they have already approached and the gaps in their geographic or product coverage. The map shows whether the sector is early or late in its consolidation, and it tells you whether to move quickly, partner or stay organic.

The supply of UK deals is variable. The Office for National Statistics estimates 231 completed domestic M&A transactions, where a UK company acquires another UK company, in Q4 2024, then 147 in Q1 2025, 228 in Q2, 164 in Q3 and 152 in Q4 2025 (Exhibit 2). The figures are provisional and revised between bulletins, and they are a partial view of the market since they cannot capture every private transaction, but the direction is clear: activity fluctuates sharply from quarter to quarter.

Value tells a similar story. The ONS estimates that the value of domestic M&A was £1.8 billion in Q4 2025, against £6.4 billion in Q4 2024. A handful of large transactions can move the quarterly total, so we would not read too much into the headline; but for a founder planning a programme of bolt-ons, the practical message is that opportunities do not arrive at a steady rate, and a plan that depends on a fixed number of deals per year will be disrupted.

The population of potential targets is large but mostly unsuitable. The Department for Business and Trade estimates 5.7 million UK private sector businesses at the start of 2025, with SMEs accounting for 99.85% of them, but 4.3 million (75%) employ no one aside from the owners and only 1.4 million have employees. The relevant universe for a bolt-on is a small fraction: businesses with employees, a profitable core, a clear fit and an owner prepared to sell.

Because the supply of well-fitting targets is limited and sponsors are competing for them, origination becomes a core capability. Buyers who wait for banker-led processes see the same assets as everyone else and pay accordingly. Buyers who build relationships with owners before they are ready to sell, through trade bodies, suppliers, advisers and direct approaches, see opportunities earlier and can agree terms without an auction.

The action is to define the target profile before searching. Specify the services or products, customer types, geography, size band, margin range, owner age and cultural attributes. Build a long list, rank it and begin conversations with the most attractive owners, even if the timing is two years away. The cost of searching is part of the cost of the strategy, and it should be budgeted.

Sellers' behaviour also changes with the cycle. When fewer transactions complete, owners who are not under pressure tend to wait, and the owners who do sell are often those with a reason: retirement, succession or a performance problem. A buyer should therefore ask why this owner is selling now, and what that tells it about the business, before it asks what the business is worth.

The attraction of buy-and-build is the idea that small companies trade at lower multiples than large ones, so combining them creates value. GF Data, which collects completed private equity transactions in the US lower middle market, reports average 2024 total enterprise value to EBITDA multiples of 6.4x for transactions of $10–25 million, 6.8x for $25–50 million, 8.3x for $50–100 million and 8.6x for $100–250 million (Exhibit 3). In the first half of 2025 the $100–250 million tier reached 10.0x, while sub-$25 million tiers averaged 6.3x and 6.9x.

On this evidence the logic looks straightforward: buy at the lower end of the range, build a larger business and sell at a higher multiple. The first caution is geography and sample. GF Data covers US sponsor-backed transactions, and we have not found equivalent UK data that is public and comparable, so UK founders should treat the figures as an indication of the size effect, not as a forecast of what a UK buyer will pay in a UK sale.

The second caution is that add-ons are not necessarily cheap. Gulfstar, summarising GF Data, notes that add-ons briefly surpassed platforms in valuation in Q1 2025 (7.7x versus 7.6x) before both averaged 7.2x in the first half of 2025. When many sponsor-backed buyers compete for bolt-ons, targets can be priced like platforms. The arbitrage then depends less on a structural discount and more on finding deals others do not see and integrating better than they do.

Multiple expansion comes from the quality of the combined business and not from its size alone. A larger group trades at a higher multiple when it has a professional management team, diversified customers, reliable reporting and a record of delivering the plan. Those attributes are built through integration, which is why the multiple is an output of capability. A group that is simply a collection of businesses under one name is unlikely to earn the premium.

The action for the CEO is to model three cases for each deal: no multiple expansion, modest expansion and a premium. The deal should be acceptable in the first case, on cash returns and deleveraging alone, with expansion as upside. If a deal works only when the exit multiple is higher than the entry multiple, the plan depends on a market outcome that nobody controls.

Transaction costs also eat into the arbitrage. Each acquisition carries advisory, legal and due diligence costs, integration spend and management time, and these are largely independent of the target's size. On small deals they take a larger share of the earnings acquired, which is another reason to favour fewer, better-fitting targets over a long list of tiny ones.

McKinsey's research on programmatic M&A is the most cited evidence that repeated bolt-ons can create value. It defines programmatic M&A as a company making more than two small or midsize deals in a year, and it tracks the largest 1,000 listed companies in the world. Programmatic acquirers earned higher excess shareholder returns than peers using other approaches between 2007 and 2017, and composed nearly one-third of the companies that remained in the Global 1,000 over ten years.

The more useful findings concern practice. In McKinsey's 2019 Global M&A Capabilities Survey, cited in the article, programmatic acquirers were twice as likely as peers to estimate revenue and cost synergies, and 1.4 times more likely to have designated clear owners for each deal stage. These are not exotic techniques. They are the basics of disciplined project management applied to acquisitions, repeated until the organisation is good at them.

The limits of the research should be clear. It covers large listed companies, not owner-managed businesses, and the effect measured is on shareholder returns, which a private company does not report. The transferable lesson is about repeatability: successful acquirers have a standard method for finding, assessing, buying and integrating, and they apply it each time. Appetite for deals does not make a company programmatic; a process does.

For a founder, the implication is that the first acquisition is the riskiest. The method is still being invented, the team has not worked together on a deal, and the lessons will be learned at the cost of the first target. Choose a first deal that is small, close to the existing business and not critical to the plan, so that errors can be absorbed. Treat it as the pilot for the engine, not as a strategic transformation.

The action is to write the integration playbook before signing the first letter of intent. It should cover the first hundred days, owners for each stage, a method for estimating synergies, the approach to systems and reporting, customer and staff communication, and the measures that will show whether the deal is working. Review it after each deal and update it with what was learned.

McKinsey's definition is also useful as a threshold for self-assessment. A company that makes an acquisition only once in several years is an occasional buyer, and cannot expect to build the routines of a programme. A company that intends to do several small deals each year needs a standing team, a standard process and a system for learning, which is a different organisation from the one that ran the first deal.

Integration capability has four components: people, process, systems and governance. People means a named integration lead with authority, a finance function able to consolidate quickly and managers who have done it before or have been trained. Process means a repeatable approach to due diligence, planning and day-one readiness. Systems means a finance and customer platform that can absorb a new business. Governance means a board that reviews each deal against criteria agreed in advance.

Exhibit 4 relates integration capability to the availability of attractively priced targets. Where capability is low and targets are scarce, the right answer is to build organically. Where capability is low but targets are plentiful, the priority is to build capability first, and perhaps to do one small pilot deal. Where capability is high but targets are scarce, buy opportunistically. Where both are strong, the conditions for buy-and-build are present.

There are early warning signs that capability is lacking. Monthly accounts are late or unreliable. Key decisions depend on the founder. Different teams use different systems for the same process. Customer relationships sit with individuals rather than the company. Previous projects, even small ones, have run over time or budget. Each sign is a reason to fix the basics before adding the load of an acquired business.

Hiring for capability can be faster than building it from within. An experienced finance director, an operations lead who has integrated acquisitions or an external integration specialist can compress the learning curve. The cost is real, and it should be weighed against the cost of one failed deal. A modest investment in capability at the beginning usually costs less than the value lost when the first integration goes wrong.

Exhibit 6 sets out six steps for building the engine: define the thesis, build the base, create the playbook, fund the pipeline, run a pilot and then scale. The sequence is intentionally patient. It can be completed in a year by a company with a stable core, and it tends to produce a stronger group than one that signs its first deal at the first opportunity.

A founder building a platform operates in a market shaped by sponsors' own constraints. Bain's Global Private Equity Report 2026 puts global dry powder at $1.3 trillion, but it also records that the industry is still sitting on 32,000 unsold companies worth $3.8 trillion, and that holding periods at exit now hover around seven years, up from five to six years in 2010 to 2021. Capital is available, but sponsors with ageing portfolios must find exits.

The exit market is improving. Bain reports that global buyout-backed exit value jumped 47% to $717 billion in 2025. For a founder, this matters in two ways. First, sponsors that exit generate capital for new investments, supporting competition for bolt-ons. Second, a platform with a record of integrated add-ons, reliable reporting and a path to growth is the kind of asset sponsors will want to buy, which gives the founder an exit option if the group scales.

Funding choices need to match the plan. A programme funded from operating cash flow is slower but keeps control. Bank debt accelerates the pace but adds covenants and a fixed repayment schedule. Sponsor equity brings capital and expertise but also governance, a target exit date and dilution. Each is legitimate, and the right choice depends on the founder's goals. This article is information, not advice, and raising capital can be a regulated activity that requires authorised firms.

Structure each deal so that the group survives a miss. Use deferred or contingent consideration to share the risk of performance with the seller, retain key people through incentives, and keep leverage at a level that allows for a poor year. A group that must hit every forecast to meet its obligations is exposed to a single failed integration. Keep headroom, and model the downside before every offer.

The action is to decide the intended exit route before the first deal. A trade sale, a sponsor-backed secondary, a management buyout or long-term ownership each imply different structures, governance and timelines. Seven-year sponsor holding periods are a reminder that a platform strategy is a long commitment. Founders who know their route can choose targets and funding that fit it.

Think also about the buyer's perspective on your group. A sponsor or strategic acquirer will test the quality of earnings across the acquired businesses, the dependence on the founder and the real cost of integration, just as the group tested each target. Keeping clean records of each deal, including the purchase price, the integration plan and the actual results, makes the group's eventual sale far smoother and supports a stronger price.

The decision between acquisition and organic growth should be taken against explicit tests rather than enthusiasm. Exhibit 5 sets out six: the strength of the core, integration capability, target availability and fit, capital structure, management bandwidth and the strategic logic. For each we show the signal that favours buy-and-build and the signal that favours organic growth. If most signals point the same way, the choice is clear; if they are mixed, the sensible step is a pilot.

Organic growth is the better choice when the core business is still unstable, when the founder is the main source of revenue, when systems cannot support more complexity or when the investment in a new product, market or channel would deliver a higher return than a purchase. Organic growth is slower to start and cheaper to correct. It also builds the capabilities that later make acquisitions work, which is the strongest argument for doing some of it first.

Buy-and-build is the better choice when the core is stable and cash-generative, when the market is fragmenting and scale confers real advantages, when there is a credible pipeline of targets with strategic fit, and when the integration engine exists. It is also better when speed matters, for instance when a competitor is consolidating the sector and the window to secure the best targets is closing. Timing matters, and so does restraint.

Hybrid routes can reduce risk. A minority investment, a joint venture, a distribution agreement or an acquisition of a team rather than a company can give access to capability or customers without full integration. These routes are often overlooked by founders who think only in terms of control. They can serve as a pilot for the engine, and they give the founder information about the target before committing to a purchase.

For the CEO, the decision is to commit to a 90-day acquisition readiness review: test the core, audit the capability, map the consolidators, define the target profile and write the playbook. At the end, the board should be able to say either that the group is ready to pursue its first bolt-on, with a defined pipeline and funding, or that it should grow organically for the next twelve months and build the missing capability.

Karter McKinley's M&A & Corporate Development work supports founders and boards in testing the case for acquisition, defining target profiles, building the integration playbook and running the pilot described here. Where regulated activity is involved, we work alongside FCA-authorised firms and qualified legal and tax advisers. This article is information, not investment advice.