Nearly three in four US private equity buyouts last year were add-ons. PitchBook puts the 2025 figure at 72.9%, almost exactly its five-year average of 72.8%. The buyout that makes the news is often the first of several deals, and the plan built on it will need more money, some different people and new commercial relationships, much of which becomes clear in the months after closing.
Most of our work is in what happens next.
The next deal needs paying for
Buy-and-build is no longer a niche strategy. Hammer, Knauer, Pflücke and Schwetzler (2017) looked at 9,548 buyouts and 4,937 add-on acquisitions across 86 countries, and found add-ons were most likely when the sponsor was experienced, the portfolio company was large and had done deals before, the industry was moderately fragmented and financing conditions were good. In a survey of 79 private equity investors managing more than $750 billion, Gompers, Kaplan and Mukharlyamov (2016) found that follow-on acquisitions were important in more than half of their deals.
Every follow-on has to be funded, usually from a mix of debt and new equity. The lenders may have agreed an acquisition facility or an accordion at the original buyout, or may be asked for an incremental facility, and larger deals often need fresh equity from the sponsor, sometimes with a co-investor if the deal is too big for one fund to hold. Because the plan is set early, the funding conversation usually starts well before anyone names a target.
Finance changes first
For many founders, the finance function is the first thing a buyout changes. New owners want monthly management accounts, covenant compliance certificates, a board pack and a thirteen-week cash forecast they can rely on. A finance team built to keep a founder informed was rarely built for that, and until the deal closed it did not need to be.
New owners often change the people too. In the Gompers, Kaplan and Mukharlyamov survey, almost 58% of investors said they recruit their own senior management team, 31% before investing and roughly half afterwards. Acquisitions in general have a similar effect: Krug and Shill (2008) followed more than 23,000 executives at over 1,000 acquired companies and found that more than 30% left in the first year after the deal, with turnover averaging about 21% a year over the following decade. That is more than twice the rate at companies that were not acquired.
A common answer is an interim finance leader while the permanent search runs. That gets the new reporting in place early, and it means the permanent hire is made against a brief written for the new owners.
Suppliers, partners and the odd division
Put two businesses together and the overlaps show. Two logistics contracts become one, distribution agreements are renegotiated, and a unit that made sense to the previous owner starts to look like a distraction.
A change of leadership makes this more likely. Weisbach (1995) found that companies are more likely to sell a loss-making acquisition around the time the chief executive changes, and Pan, Wang and Weisbach (2016) found that disinvestment is most common in a chief executive’s first few years. For specialist suppliers, and for buyers looking for carve-outs, a new owner or a new leader is often the moment to get back in touch.
Visible, but scattered
Very little of this stays secret for long. The deal is announced, a new board is appointed, and a chief financial officer arrives or a vacancy appears.
The trouble is that each need goes to a different specialist. Capital goes to lenders and placement agents, the finance role to a search firm, and targets and partners to M&A advisers. Only the sponsor sees the whole plan, and each adviser tends to hear about its own part late.
Ronald Burt’s work on brokerage is relevant here. Opinion and behaviour are more alike within groups than between them, so people whose networks bridge separate groups see options that others miss (Burt, 2004). We work alongside those specialists, making introductions across capital, talent and dealflow, so that all three parts of a client’s plan are seen together.
What to do with it
If your business has just been bought, plan the three needs together. Find out how the next add-on will be funded before anyone needs the money. Be honest about whether finance can report the way the new board expects. Then write down which suppliers, partners and divisions the plan puts under review, because someone outside the business is probably working that out already.
If you lend to, sell to or invest alongside private equity, watch for the closing announcement, board changes, a new or departing CFO and the first mention of add-ons. Many of the decisions about the year ahead are made in the first few months, so hearing about them afterwards is usually too late.
Most of the research cited here uses US data, so the numbers may differ in the UK and Europe, though we would expect the pattern to hold.
References
- Burt, R.S. (2004) ‘Structural holes and good ideas’, American Journal of Sociology, 110(2), pp. 349-399.
- Gompers, P., Kaplan, S.N. and Mukharlyamov, V. (2016) ‘What do private equity firms say they do?’, Journal of Financial Economics, 121(3), pp. 449-476.
- Hammer, B., Knauer, A., Pflücke, M. and Schwetzler, B. (2017) ‘Inorganic growth strategies and the evolution of the private equity business model’, Journal of Corporate Finance, 45, pp. 31-63.
- Krug, J.A. and Shill, W. (2008) ‘The big exit: executive churn in the wake of M&As’, Journal of Business Strategy, 29(4).
- Pan, Y., Wang, T.Y. and Weisbach, M.S. (2016) ‘CEO investment cycles’, Review of Financial Studies, 29(11), pp. 2955-2999.
- PitchBook (2026) 2025 Annual US PE Breakdown. Report (PDF) (opens in a new tab).
- Weisbach, M.S. (1995) ‘CEO turnover and the firm’s investment decisions’, Journal of Financial Economics, 37(2), pp. 159-188.
General commentary only, not investment, legal or tax advice.