First, a platform is acquired, often a solid company with good management. Acquisitions in the same or an adjacent sector follow. The group gains scale, purchasing power and a broader customer base. Larger companies usually achieve higher multiples in the market than small ones.
This matters for sellers of mid-sized companies because many buyers today are platforms. According to an analysis by Eight Advisory based on Mergermarket data, the number of add-on acquisitions in Germany rose from 62 (2015) to 282 (2022). As an add-on, your company is in demand because it complements the group. As a platform, you often achieve a higher price and can reinvest alongside the buyer.
In practice, integration determines success. Buyers pay attention to systems, culture and key people. Sellers should clarify what role they and their team will play in the group in future.
Example
Hypothetical example: An investor buys a platform with €3 million EBITDA at 7x, i.e. €21 million. It buys three add-ons with €1 million EBITDA each at 5x for a total of €15 million. At 7x, the group with €6 million EBITDA would be worth €42 million, against €36 million invested.
Platform vs. add-on
| Feature | Platform | Add-on |
|---|---|---|
| Typical size | Larger, good management | Smaller |
| Multiple | Higher | Lower |
| Seller's role | Often rollover equity | Often full exit |
Sources
- Buy-and-Build-Aktivitäten im deutschen M&A-Markt steigen deutlich an, Unternehmeredition