Strategies for scaling up: Achieve scale at speed with a buy-and-build approach

BGF investor Jonathan Earl looks at the benefits of putting growth capital to work with the right acquisitions.

BGF, the UK’s largest growth capital investor, has backed over 450 companies since it was founded in 2011. This experience combined with our long-term approach means there will continue to be funding available for ambitious, fast-growing companies, even if we are facing a period of time when growth slows or even stops for some months.

Investors can help share the risk: companies don’t have to get through lean or volatile times on their own.

All the companies we back have a growth strategy, to scale operations and put capital to work. One of the most effective ways of delivering value is through considered acquisitions that help the business by adding new services and products, create revenue and cost synergies, or even speed up geographic expansion.

Whatever the rationale to ‘buy and build’, the approach should be the same. Treat your acquisition strategy like a construction project: create a plan, gather complementary building blocks, and fit them together.

Done well, the result will be something that’s worth more than the sum of its parts. So how can growth companies get their buy and build strategy right?

Understand your own success first

You should have a clear understanding of what has made your business successful to date and how realistic it is that you can replicate that within the company or companies you acquire.

Bolt-on acquisitions should not just make you bigger, but also better. This also needs to be delivered while continuing to drive organic growth and all the successes achieved to date.

Where does the growth opportunity lie, and can you make the most of it without losing sight of your existing customers and revenues?

Find the right investor

Most growth companies need to raise outside investment to fund a buy and build strategy. Choosing a funding partner comes down firstly to culture – it is essential to make sure their approach and ambition fits with yours.

Second comes timeline – can the investor provide funding as opportunities arise, or be patient until the time is right for an exit? And finally, can the funder provide enough equity, either now or in the future, to capitalise on opportunities?

As a minority investor with a lot of experience, BGF offers the guidance and expertise that founders are looking for, without taking a controlling stake in their business.

The work starts before the deal completes

Management teams must carry out thorough due diligence to fully understand potential problems or liabilities. It’s imperative to have detailed plans to deal with these risks, but also execute on the incremental growth opportunities that underpin the appeal of the acquisition in the first place.

A buy and build strategy is ultimately delivered by people, and so having the resource ready to integrate what you have bought is essential.

This means fully considering all aspects, from commercial expectations and results, all the way through to how two different corporate cultures will become one.

Ultimately, building a larger company with a strong market position is an opportunity to increase resilience in a tough economy.

This text in this article appeared as part of ‘Strategies for scaling up: Achieve scale at speed with a buy and build approach‘ published on TheBusinessDesk.com on 1 September 2022.