McKinsey September 26, 2024
PE funds increasingly invest in add-on deals to grow faster and perform better, but how they go about executing such deals has changed.
At a time when growth is challenging for many companies, one strategy that has consistently helped private equity (PE) funds enhance their portfolio companies is add-on acquisitions.
Add-on acquisitions composed 70 percent of the total PE deal count in 2023, up from 57 percent in 2017 (exhibit). The strategy has gained prominence because of changes in the investment and macroeconomic backdrop. In the past, given the accessibility of low-cost debt financing and expanded valuation multiples, PE funds could achieve their performance targets using strategies such as operational efficiency aimed at growth, financial engineering, and strategic repositioning. That...
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