30 Jan 2018
Investcorp, a leading global provider and manager of alternative investments, today releases its white paper looking at platform investment activity across the private equity industry and the increased volume of buy-and-build transactions as market conditions require more creative deal structuring.
The white paper titled, “Insights: Platform investments: Buy-and-Build Comes of Age” identifies an acknowledgement by the industry that in order to meet return expectations of investors, financial engineering must be complemented by a robust operational value creation strategy. Once the core focus of lower and mid-market operators, large buyout firms are increasingly realizing the potential of platform investments.
The paper explores in detail the value drivers and benefits of leveraging a portfolio company investment as a platform for M&A to consolidate an industry, delivering greater value to the portfolio company and ultimately improved returns to investors. On investment, reaping greater synergies through achieving critical mass and economies of scale in the areas of professional infrastructure, R&D and IT software and systems can immediately improve margins, whilst on exit, a more sizeable group presents the private equity owner with more divestment options and greater potential to benefit from higher valuations.
Carsten Hagenbucher, Managing Director in Investcorp’s European Corporate Investment team, said, “Buy-and-build strategies have historically formed the investment theses of smaller private equity industry players. Increasingly, larger investors with significant dry powder behind them recognize that considerably better IRRs can be achieved through bulking together smaller companies to form a platform, versus those generated on stand-alone deals. For those GPs looking to deliver top-quartile returns, creative operational value creation strategies cannot be overlooked.”