Platform Company
An initial acquisition that serves as the foundation for a buy-and-build strategy, with bolt-on acquisitions added to create scale and value.
A platform company is an initial acquisition that serves as the foundation for a "buy-and-build" investment strategy, where additional smaller businesses are acquired and integrated.
Platform Company Characteristics
Ideal Platform Traits:
- Strong management team
- Scalable infrastructure
- Geographic or product expansion potential
- Healthy margins and cash flow
- Industry fragmentation
Buy-and-Build Strategy
1. Acquire Platform: $3M EBITDA at 5.0x = $15M
2. Add Bolt-ons: 3 × $500K EBITDA at 3.0x = $4.5M
3. Combined EBITDA: $4.5M
4. Exit Multiple: 6.5x (larger business premium)
5. Exit Value: $29.25M
Value Created: $9.75M through roll-up
Platform vs. Bolt-on
| Attribute | Platform | Bolt-on |
|---|---|---|
| Size | $2-5M+ EBITDA | $500K-$1.5M EBITDA |
| Multiple | 4-6x | 2-4x |
| Management | Strong/retained | Often integrated |
| Integration | Foundation | Added to platform |
Why Platforms Work
- Multiple arbitrage: Buy small, sell big
- Synergies: Shared overhead, purchasing power
- Geographic expansion: New markets
- Product expansion: Cross-selling opportunities
Related Terms
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