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3 core factors to consider when planning a Buy and Build Strategy

Recently our Founder and Chairman, James Kaberry, shared his SME Capital story with the Buy & Build Podcast with Paul Quirk, where he discussed the nuisances of his time executing a successful buy and build with Pantheon Financial in the early 2000’s, selling before the financial crisis, and buying it back again a couple of years later.

It was the struggle to find suitable lending options that inspired James to set up SME Capital. 

The episode is a fascinating dive into the challenges in setting up an alternative lender, the various characteristics that make SME Capital such a compelling option for acquisition entrepreneurs, and how to best prepare yourself before applying for funding.

If you’ve not listened to it yet, you can enjoy the episode here: James Kaberry - Buy & Build Podcast with Paul Quirk

So what is a Buy and Build Strategy?

Put simply, when a business builds out its operations by purchasing a platform firm with established know-how, it employs the buy and build strategy.

The benefit of a buy and build strategy is that it enables businesses to expand and grow through strategic acquisitions that add value to their business. A solid buy and build strategy should focus on companies that can work together as a team. A target business where you can bring expertise and skills to enhance and flourish that business is more likely to result in success.

In this blog, we look at 3 core factors to consider when planning a Buy and Build Strategy

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1. Strategic integration

If a platform firm is acquired and integrated into the acquirers businesses, it can be a difficult process if not properly planned. The procedure should be carefully considered for each acquisition separately and with great care.

The goal of each acquisition should be to be meticulously, yet seamlessly, integrated into a larger group as quickly and efficiently as possible. This ensures that management makes smart judgments regarding firms that fit well with its other acquired businesses and supports growth and expansion plans.

The company should also make sure it assesses its own capability to structure and finance a buy and build strategy to make sure it has the right foundations in place that reduces the risk of failure.

Make sure you build trust with the current management team, and ensure full transparency on the plans for the business, growth ambitions and strategically how this will be mapped out. Encourage input and feedback, as that will create a sense of togetherness and start building relationships. 

2. Choosing the right industry

The success of the buy and build approach can depend on the industry. Some industries are characterised by a lack of maturity and profitability, particularly for short-term investments. Therefore, management teams should identify sectors that demonstrate growth and that are forecasted to develop further.

You should carefully evaluate sectors that have matured players established as your scope for growth, unless you have identified a strong USP, will be limited. Ideally, the platform company should be in a strong position within this industry. If the industry is a good fit, experience will help the business succeed in the future. 

Aligning your own business, industry experience and your own set of skills to a chosen business is also important as this can minimise time and capital spent on blending businesses.

Finally, while avoiding being overly cautious, do consider a step-by-step approach with a buy & build strategy, making sure an acquisition is bedded in and up and running before looking ahead to your next strategic purchase.

3. Keep the customers in mind

Customers are your most important asset and should be your top priority when considering any buy & build strategy. Without them, you have no business to conduct. 

To ensure a smooth transition, customers should be kept up to date on developments and informed in advance if any changes are made to the business. They will expect to see an actual improvement in the business, and expect you to be true to your word and promises. 

Strategically, each of the acquired small businesses should work to win and keep their existing consumers in the new structure. Show concern for them and demonstrate the advantages of the company's adjustments.

Customers should feel satisfied that this was in their best interest.


To learn more about buy and build financing, feel free to get in touch with us today.

About SME Capital

SME Capital was founded to support the growing number of SMEs who face difficulty or frustration in accessing capital through traditional methods. We understand the importance of real and trusted relationships in the SME lending market, and have dedicated Regional Directors based across the UK. By combining traditional lending expertise with the latest in data analytics, we are supporting established UK SMEs with their long-term objectives and business ambitions.

The Market We Serve

SME Capital provides SME funding for businesses which are integral to the UK economy. We support UK businesses able to demonstrate recurring revenues and a track record of profitability. They often have unique needs that fall between traditional lending routes and the automated response from online only business loan lenders. We cater to businesses with strong cash flows, assessing each business on its strengths, rather than focusing on the asset base.

August 2022

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