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PE Continues to Evolve and Enhance the Add-On Acquisition Process to Maximize Returns

By now, most of us involved in private equity scenarios are well aware of the significant upside potential that add-on acquisitions can bring when executed successfully—such as enhanced revenue growth, improved cost efficiencies, and higher exit valuations. In today’s high-cost capital environment, achieving these outcomes is easier said than done.

The article quoted below highlights several key levers for success, one of the most critical being the need for a repeatable integration process—essential for scaling across multiple acquisitions. 

From our experience at Riveron, clients see the greatest success when their integration plans are adaptable—tailored to the specific needs of each individual add-on. This approach requires more than just an effective post-close execution; it involves a coordinated effort with your advisors to develop a detailed, well-thought-out plan during the entire due diligence process. By doing so, you can ensure more efficient integration and maximize the long-term success of your add-on strategy.

At a time when growth is challenging for many companies, one strategy that has consistently helped private equity (PE) funds enhance their portfolio companies is add-on acquisitions. Add-on acquisitions composed 70 percent of the total PE deal count in 2023, up from 57 percent in 2017 (exhibit). The strategy has gained prominence because of changes in the investment and macroeconomic backdrop. In the past, given the accessibility of low-cost debt financing and expanded valuation multiples, PE funds could achieve their performance targets using strategies such as operational efficiency aimed at growth, financial engineering, and strategic repositioning. That is much harder to accomplish today.

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accounting & finance operations, accounting advisory, business performance improvement, interim management services, transaction services, consulting professionals, lenders, mergers & acquisitions, office of the cfo, private equity