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Buy-and-Build: The Dealmakers
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In the previous episode of Dry Powder, I asked Bain partner Tim O'Connor about the necessary conditions for a buy-and-build deal to work, including stable revenues, a fragmented market and a long tail of targets. But are those conditions sufficient?

Not quite.

In fact, none of those factors in isolation will place your buy-and-build deal on a firm path to attractive returns. What you really need is, first, a sturdy platform and, second, real synergies.

I stress the word “real” because it’s all too tempting to imagine a thousand synergies blooming between your platform company and its smaller competitors, but what happens as you shift from buying to the actual building phase?

Maybe you’ll find the platform company is not large enough, or the management team isn’t sharp enough, or the IT systems aren't integrated enough to support the synergies and the value creation to come.

In the second half of our conversation on buy-and-build strategies, Tim and I talk about synergies, real and imagined—and how a concrete plan can help you realize returns, even when multiples move in the wrong direction.

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