‘Buy and build’ is an easy thesis to get your head around: an investor provides funding, an investee company acquires other companies, and together they grow the business into a bigger, more valuable proposition. However, it’s hard to do well – particularly in the current economic climate.

While record inflation, rising interest rates, the cost-of-living crisis, and geo-political pressures putting the squeeze on many businesses, amongst those many challenges there are still opportunities for growth.

For some, in congested market sectors buy and build may be the most realistic way to grow; for others, the strategy is an effective way to bolster market position against overseas rivals and elevate a brand, while allowing you to command a better multiple for the business upon exit.

As certain markets present rare consolidation opportunities right now, through an increased number of distressed companies, or those who are using the current climate as a reason to exit a business, there may be a temptation to seize the moment in pursuit of acquisitive growth.

However, it’s essential to make the right buying decisions, at the right price, and work hard to integrate what you’ve bought. Bayfields Opticians & Audiologists is a great example of a successful buy and build strategy.

The team had already completed 18 acquisitions when BGF invested in 2020. As of August 2022, it is at 43. The business operates in a big market, has a clear strategy, knows how to integrate businesses well, and has delivered growth post-investment. It helps that the CEO, Royston Bayfield, is an effective leader who can clearly articulate his vision for the business.

So, what do Yorkshire business owners need to consider when going down the route of buy and build as part of an overall expansion strategy?

1. Track record

The first thing an investor will look for is a management team that has made successful acquisitions before. The key is to integrate the acquired businesses into the parent company and achieve the expected sales and cost synergies which will support future growth.

2. Cultural alignment

One of the main hurdles with buy and build is combining businesses with different cultures and making them work together as one. It’s important to win the hearts and minds of staff.

3. Size of market

A buy-and-build strategy will only succeed in a market where there is space for consolidation. Take the optometry market. Bayfields estimates there are 5,000 independent opticians in the UK. That’s enough to support a significant buy-and-build plan.

4. Knows a good target

Out of the 5,000 independent opticians in the UK it has identified, up to 800 sites may potentially fit Bayfields Opticians & Audiologists’ acquisition criteria. That calculation is based on location, customer demographics, staff availability and many other factors.

5. Ability to move at pace

It is easy to underestimate the management bandwidth needed to scale a business at pace.

To buy a business a month, for example, you need a dedicated integration team, a seamless acquisition plan, and enough middle managers to handle each newly acquired site or business.

6. Willingness to learn

Instead of imposing new operating procedures on day one, it may be a good idea to observe the way the target business runs. What can be learned? A collaborative, thoughtful approach is an advantage at the acquisition stage, too.

Chris Boyes is an investor in BGF’s Leeds team.

Six key tips for getting a buy and build acquisition strategy right: Chris Boyes