What is an Add-On Private Equity Strategy?

By Generational Equity


The numbers shared in the recent Audax press release were incredible: 

Audax Private Equity announced today that it has closed its 900th acquisition. Audax portfolio company, 42 North Dental, a regional provider of high-quality dental services in the Northeast, has acquired Northborough Dental Associates, a dental office in Northborough, Massachusetts.

The acquisition of Northborough Dental Associates is 42 North’s 21st add-on acquisition under Audax ownership. Audax Private Equity has invested over $5 billion in 126 platforms and 774 add-on companies.

Several items in that section caught my attention. First, not only is the number of platforms they’ve invested into amazing over 20 years – the sheer number of add-on companies is astounding. That adds up to over 6 platforms acquired annually and nearly 39 add-ons every year!

What makes this so significant is the digesting time it often takes to integrate an add-on into a platform company can be challenging. But it appears that Audax has certainly created a post-acquisition process that works really well.

This is how Young Lee, Managing Director of Audax, explained it:

“We partner with management teams, like the team at 42 North, who have the vision and drive to scale their organizations through acquisitions and organic growth. Through our disciplined Buy & Build philosophy, we seek to help our platform companies execute add-on acquisitions that fuel revenue growth, optimize operations, and significantly increase equity value.”

The strategy that Audax employs is actually very similar to many other PE firms that focus on the middle market and even those in the micro middle market.

Understanding the opportunity of an add-on strategy

What is really important for business owners to realize is that although it isn’t mentioned in their press release, it is on their website: For add-ons, they will look at companies with “EBITDA of any size”. For platforms, they are very specifically looking for companies that are larger (EBITDA minimum of $8 million); however, add-ons can be very small. 

What matters to Audax is that the add-on must have some sort of potential synergies with the platform and that it has a management team that is open to having Audax professionals become involved in growing the business.

If this type of win-win scenario appeals to you, then you should set aside some time to attend a Generational Equity exit planning conference so you can learn more about buy and build strategies and how you can effectively position your business for the scrutiny of a private equity firm (and all buyer types for that matter).

Complimentary and highly educational, at our conference you will also have an opportunity to meet one-on-one with one of our M&A professionals and discuss your specific financial goals for both yourself and your business.

You can find a conference near you by using the following link:

If you can’t locate one in your area, or if you have any questions at all, please call us at 972-232-1121 or visit our website, provide us with your contact information, and we will be in touch.

And congratulations to the professionals with Audax for achieving results that few can match!

P.S. – Since our inception we have also closed over 1,000 transactions, making us one of the leading middle market investment banks in North America.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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