A “buy and build” strategy takes several forms. Broadly speaking, we distinguish the cluster approach and the platform approach.

Clustering

In cluster formation, acquired companies are incorporated into a new group holding company and then continue to operate independently. The trade names and incumbent managements are retained. By operating within a group, the acquired companies can mutually benefit from the aforementioned economies of scale and synergy.

Platform approach

In a platform approach, a specific company is taken as the basis for the growth plan. To this, the other companies are added. The platform company often has a good market position in an attractive sector. In addition, it has good internal processes, is often ahead in the field of digitalization and has a strong management team. Companies with specific characteristics are often added to the platform company. Think of companies with a specific place in the chain, a certain expertise, or companies that serve a specific niche. These companies are called “add-ons.

Add-ons

The selection of (potential) acquisition candidates, or “add-ons,” will be based on the strategy of the platform company. Realizing the intended economies of scale will play an important role. For example, companies to be acquired may meet the following criteria:

• Providing complementary products and services.
• Direct competitors to gain market share.
• Serving other (complementary) market segments.
• Activities in other geographical areas.
• Possession of certain Intellectual.
• Proprietary rights (for example, a particular technology or patent) that can be used for multiple holdings of the platform company.
• Possessing certain expertise.