Could a buy-and-build strategy help you to grow your business?

Growth means different things to different businesses. It’s worth taking time to define what it means for you, and how best to achieve it. Once that’s clear, the strategic questions follow naturally.

• How do we win?
• What is our scalable formula?
• Are we ahead of competitors?
• Is growth coming from our core or adjacent market?
• Are we growing locally or internationally?
• Should we shrink to grow?
• Could we have a plan for structured acquisitions?

One option to grow is a buy-and-build strategy. Martin Brown, CEO of Business Growth Advisory Elephants Child, explores this in more detail.

What is a buy-and-build strategy?

A buy-and-build strategy involves acquiring multiple businesses (often in the same or complementary sectors) and integrating them into a larger, more efficient, and scalable platform. This approach is popular among SMEs and private equity firms aiming for rapid growth, market consolidation, and increased valuation through synergies and economies of scale. UK SMEs in telecoms, IT services, and accountancy are ideally suited to growth through buy-and-build driving consolidation, as well as businesses in capital-heavy sectors like builders’ merchants, where combining complementary businesses can drive scale and efficiency.

Key success factors in SME buy-and-build

In our experience, the most successful buy-and-build strategies share these traits:

• Strong platform business: A stable, well-managed core company with scalable infrastructure.
• Sector selection: Fragmented markets with many small players (e.g., business services, IT, healthcare).
• Integration capability: Ability to unify systems, cultures, and operations post-acquisition.
• Clear acquisition pipeline: A well-researched list of potential targets to maintain momentum.
• Investor alignment: Support from private equity or growth capital providers to leverage a real and arbitraged gain.

Two critical phases: Pre- and post-acquisition

We also find that there are two key areas that will determine the success of a buy-and-build strategy:

Pre-acquisition - planning and alignment

Identify complementary businesses that align with your core operations, customer base, or geographic reach. Focus on targets that offer synergies, such as cost savings, cross-selling opportunities, or operational efficiencies.

Think about defensive and attacking factors. Defensive include cost savings – for example, where there is duplication in the form of buildings, roles or plant machinery, can these be streamlined? Or can a competitive threat be neutralised?
Attacking factors might include making better use of the people talent and technologies in the business, or access and penetration in a new market.

Post-acquisition – execution and integration

The first 100 days of ownership of the new enlarged business are critical. Plan and be mercenary with the integration programming, upholding the critical cultural and client performance communications and service levels.

Follow a clear roadmap to unlock the value that was modelled:

• harmonise branding,
• streamline supply chains
• consolidate back-office functions.

Understand and manage the risks

A buy-and-build strategy can be a powerful growth engine for UK SMEs, but it comes with several risks that need careful management. Here are the key ones:

1. Integration challenges: Merging different company cultures, systems, and processes can be complex and disruptive. Poor integration can lead to inefficiencies, employee turnover, and loss of customer trust.
2. Overextension of resources: Rapid acquisition can strain financial, operational, and leadership capacity. SMEs may struggle to manage multiple entities effectively, leading to underperformance or missed synergies.
3. Valuation and deal execution risk: Overpaying for acquisitions or misjudging the strategic fit can erode value. Inaccurate due diligence may also expose hidden liabilities or operational weaknesses.
4. Regulatory and compliance issues: Acquiring businesses in different sectors or regions may introduce new regulatory requirements. Failure to comply can result in fines, reputational damage, or legal complications.
5. Market and economic volatility: External factors such as interest rate changes, inflation, or sector-specific downturns can impact the viability of the strategy, especially if acquisitions are debt-funded.

Critically a business culture can be destroyed in an instant if the inbound leadership team lacks the vision and competence of a nuanced and authentic approach to driving valuable growth.

In growth mode, a buy-and-build strategy should at least be appraised. Healthcare, finance and IT are just some of the sectors where businesses are benefiting from this approach. We are also seeing a trend in certain sectors like defence where businesses may benefit from a group cluster built upon domain specialism with a shared service provision for support in some of the functional elements of the business e.g. sales to overcome concentration issues (an over dominance of one or a few clients).

But as is always the case with successfully growing a business, having a solid plan in place and the ability to execute that plan is key.

We work in conjunction with an extensive network of external growth advisers and SME specialists, such as Elephants Child, who have been carefully selected by St. James's Place.  The services provided by these specialists are separate and distinct to the services carried out by St. James's Place and include advice on how to grow your business and prepare your business for sale and exit.

Where the opinions of third parties are offered, these may not necessarily reflect those of St. James's Place.