How to get your buy and build strategy right

What does an effective buy and build strategy look like? We hear from BGF investor Chris Boyes, who’s backed a number of growing businesses in the UK. These include Bayfields Opticians, an independent chain of opticians and audiologists that has expanded rapidly through acquisitions.

Below, Chris shares his six top tips for developing a successful buy and build acquisition strategy that’s worthy of an investor’s attention.

What is a buy and build strategy?

The buy and build strategy is a relatively easy thesis for business leaders to get their head around: you raise funding from an investor, this enables you to acquire other companies, and together, you grow the business into a bigger, more valuable proposition. While the concept of buy and build may be simple, however, it’s quite hard to do it well.

What do investors look for in a buy and build strategy?

There are certain things I always look for when considering investing in a business with a buy and build growth strategy:

1. Track record

The first thing I look for in a business with a buy and build strategy is a management team that has made successful acquisitions before. The key is to integrate acquired businesses into the parent company and achieve the expected sales and cost synergies that will support future growth. If you can’t do this, it will be very challenging to make your buy and build strategy work.

2. Cultural alignment

One of the main hurdles for strategic buyers is in the integration process: combining businesses with different cultures and making them work together as one.

It’s important to win the hearts and minds of employees. Few people would wish to be caught up in big, impersonal takeovers or mergers; instead, employees should feel that they’re joining the core business (or as the CEO of Bayfields would say, “joining the family”). It’s an advantage if the parent company can articulate a clear vision. Good leadership, with strong communication, is crucial.

3. Size of market

Some markets, such as veterinary healthcare, have seen rapid consolidation in the UK over recent years, with large, well-established participants buying up smaller companies and sites. That can make it more difficult for newer businesses to grow by acquisition.

A buy and build strategy will only succeed in a market where there’s space for consolidation. Take the optometry market, for instance. Bayfields estimate there are 5,000 independent opticians in the UK. That’s enough to support a significant buy and build strategy. If that number were much lower, I would question whether the opportunity was large enough to build a business of scale.

4. Potential targets

It’s important to identify the right targets for a buy and build strategy, to avoid wasting time and potentially capital on unsuitable acquisitions. A clear idea of what a “good” target looks like for your business is key.

Using the example of Bayfields again, out of the 5,000 independent UK opticians it’s identified, up to 800 sites may fit the company’s acquisition criteria. That calculation is based on location, customer demographics and staff availability, alongside several other factors.

5. Ability to move quickly

It’s easy to underestimate the management bandwidth required to scale a business at pace. If you’re aiming to buy a business a month, for instance, you’d need a dedicated integration team, a seamless acquisition plan, and enough middle managers to handle each newly acquired site or business.

Without these elements, senior management may become too distracted by acquisitions to continue running the business day to day. And this could mean integrations aren’t successful, synergies and efficiencies aren’t delivered, and, ultimately, earnings could go in the wrong direction.

6. Willingness to learn

The integration process provides a unique opportunity to pick up new skills and methods from an acquired company. Instead of imposing new operating procedures on day one, it may be a better idea to observe the way that potential targets run. What can be learned?

A collaborative, thoughtful approach is an advantage at the acquisition stage too. A seller will want to feel they’re leaving their business in the right hands. And not every business owner is motivated purely by money and profitability; they may be equally concerned about their staff, their customers and their legacy.

Examples of successful buy and build strategies

If it’s not already obvious, Bayfields is a great example of a company expanding through a buy and build strategy. When BGF first invested in Bayfields in 2020, the team had already completed 18 acquisitions of smaller businesses. By August 2022, this number had grown to 43.

Bayfields operates in a big market, has a clear strategy, knows how to integrate businesses well, and has delivered growth post-investment. Its CEO, Royston Bayfield, is an effective leader, who can articulate his vision for the business.

Royston Bayfields, Founder & CEO of Bayfields Opticians said: “When we first began discussions with BGF, I felt really reassured and trusted them. I speak to Chris now on a weekly basis and I genuinely enjoy those conversations. He acts as a sounding board and an extension of our team.”

Other BGF portfolio companies that have achieved considerable success and value creation through buy and build strategies include nursery chain Kids Planet and dental provider Scottish Dental Care Group.

I’m interested in the healthcare sector, and I also see opportunities in healthcare businesses that are expanding by rolling out new sites, rather than buying new ones. BGF has supported a number of businesses to carry out effective roll outs, such as as care facilities group Springfield Healthcare, and A Wilderness Way, which provides specialist residential childcare and crisis intervention services.

An edited version of this article appeared in the Yorkshire Post as Six key tips for getting a buy and build acquisition strategy right, published 16 December 2022.