Buy & Build Strategy: what it is, how it works, and when it makes sense for your business

In this article, we explain what a Buy & Buildstrategy consists of, how it is financed, what makes it create value, and in what cases it is suitable for technology and digital services companies.

Operational definition of Buy & Build

A Buy & Build strategy combines two linked movements:

• Buy (acquiring a platform): An investor buys a core company of a certain size that is a good strategic fit. That company will act as a platform on which to grow.
• Build (building the group): from the platform, other companies in the same or adjacent sectors are acquired sequentially to capture synergies and create a leader with greater scale, better positioning and efficiency.

The key to the model is that 1 + 1 > 2; that is, the merger of companies should generate more value than each company separately (complementary products or services, additional geographical coverage, access to new channels, economies of scale, operational standardisation, brand, talent, etc.). It is usually applied in fragmented sectors, with many SMEs and a clear opportunity for consolidation.

When is the Buy & Build strategy recommended?

It is not recommended to implement this strategy at any time, but rather in specific cases such as:

• High fragmentation: there are many medium-sized/small players without a clear leader.
• Tangible synergies: the two companies have complementary products/services, geography or sales channels; they may share functions (marketing, finance, people, purchasing) or technology platforms.
• Stable or recurring demand: they have models with recurring revenues that facilitate predictability and, therefore, leverage and exit valuation.
• Valuation window: multiple arbitrage occurs when moving from smaller businesses to a larger group with lower perceived risk.

There are also certain warning signs that would make it inadvisable to carry out this operation, such as low integration between companies (very different cultures, for example), excessive dependence on founders, high capital intensity, or synergies that are difficult to realise.

The platform company: role, requirements and governance

A platform company is the initial company on which the group is built. The most common requirements for being a platform company are:

• Size and positioning: the company must have sufficient income and profitability to operate as the driving force behind the group (as a guideline, we are talking about companies of a certain size. In some cases, platforms with a turnover of around 20 million are cited).
• Committed management team: financial investors do not manage day-to-day operations, but rather need managers who are familiar with the sector. It is common for shareholder-managers to reinvest a portion of their earnings (e.g., 10–30%) in the new group in order to align interests.
• Governance and reporting: it must have an investment committee, a scorecard, capital discipline and a clear integration plan.

Plan financing: group capital, debt and cash flow

The strategy is financed through a combination of:

• Investor capital and reinvestment by managers (financial and project commitment).
• Debt for the initial operation (buy) and, subsequently, for complementary acquisitions based on the group's cash generation capacity and cash flow predictability.
• Cash flow generated by acquired companies, which helps finance the build.

It is important to know that debt accelerates the return on equity, but increases risk and can drain resources for organic growth if not planned prudently.

The three levers of value creation

In a Buy & Build plan, shareholder returns come from three levers:

1. Business growth (volume and margins), often measured by operating profit before depreciation and amortisation (EBITDA) as an approximation of cash generation.
2. Multiple expansion (also called multiple arbitrage): this involves buying smaller companies at relatively low multiples and selling a larger, less risky group at higher multiples.
3. Financial leverage: based on the prudent use of debt to improve the return on equity.

Specialised investors often set internal targets for managers' return on reinvestment (e.g., multiplying by 3–4 times over several years), always depending on the case and the plan's performance.

Roadmap: from Buy to Build

Step 0 — Sector thesis. The first step is to define the market size, competitive dynamics, key value creation variables and synergy map.

Step 1 — Buy (acquire the platform). In this phase we agree: the selection criteria, goal analysis, business valuation, negotiation and letter of intent (LOI).

Step 2 — Build (complementary acquisitions). Targets are continuously sourced prioritising synergyand ease of integration, pricing structure (possible earn‑outs), financing and closing.

Stage 3 — Integration and capturing synergiesThe aim is to draw up a 100-day plan setting out the organisation, systems, offering, brand, commercial governance, talent and indicators for the next 100 days.

Beneficios y riesgos del Buy & Build para pymes

Like any strategy, buy and build also has its advantages and disadvantages.

In terms of benefits, we can highlight the following:

• Accelerates growth compared to pure organic growth
• Scale and efficiency (procurement, marketing, processes, technology)
• Better positioning and, with it, potential improvement in the multiple on exit
• Alignment of investor-manager interests through reinvestment and governance

But on the other hand, it also has its risks:

• Implementation of integrations (culture, systems, talent retention)
• Excessive debt or less predictable cash flows than expected
• Distracting from the customer during the wave of acquisitions
• Overestimated synergies or slower to capture

How can these risks be mitigated? There are several actions that can be taken, such as implementing rigorous operational and technological due diligence, an integration PMO with synergy metrics and clear accountability, having a prudent debt policy and stress scenarios, or maintaining organic growth (it's not all about buying).

Si planeas vender tu empresa para integrarte en una plataforma

For some founders, selling to a platform (while retaining a minority stake) can be an excellent way to realise value today and participate in the group's growth. If this applies to you, you will be interested in Sell a company and content on negotiation, earn‑outs and closing.

Decision checklist

If you are unsure whether to implement a Build & Buy strategy, we recommend that you consider the following questions before making any decisions:

• Are there quantifiable synergies and a detailed plan to capture them?
• Does the platform have the size, leadership and team to integrate?
• Is the management team aligned (reinvestment, incentives, governance)?
• Is the debt structure prudent in stress scenarios?
• Have we identified acquisition targets and their priority in terms of synergy contribution?
• Is there a realistic integration plan with organisation, systems and talent?
• Is organic growth and customer experience preserved during the build?

How to get started with a Build & Buy strategy?

If you are considering carrying out an operation of this nature, we recommend requesting a feasibility assessment for your sector. If you already have a candidate platform, you should work on a synergy plan, an integration plan and a financing model in line with your risk profile.

If you are unfamiliar with these terms, we recommend that you review the documentation in the Buy a company section of our M&A Academy.

If you still wish to receive personalised advice for your case, our advisors specialising in the acquisition of technology companies will help you assess whether a Buy & Build strategy makes sense for you, quantify synergies and design the execution and integration plan.

We leave you with this webinar as a summary where we discuss what a Buy & Build investment strategy is and how it can help your company grow.