Equity firms specialize in acquiring platforms and then during the ensuing 5- to 7-year “hold period” make additional investments in synergistic companies in order to expand the platform far beyond the size of the initial investment. These additional investments are called “add-ons” or “bolt-ons.” These descriptors refer to the fact that the subsequent investments are acquired and then rolled into the platform acquisition. They are typically “additive” and enable the equity firm to grow its investments beyond just organic expansion.
This strategy has become extremely popular for equity firms to pursue, according to PitchBook, a leading research company focused on private equity and venture capital firms. They do a great job compiling research on an industry that is notoriously secretive.Read More