Dealology – Three Key Issues in Private Equity Add-On Deals

Private equity add-on acquisitions – the deals where a PE firm has already purchased a portfolio company in an industry or market segment and uses that investment as a platform to acquire other companies – have increased every year since 2013 and in 2018 accounted for two-thirds of all private equity deals and more than $300 billion of deal value. These deals introduce unique issues for buyers, sellers and their advisers. Three key issues are:

  1. Where is the money coming from? There are more potential funding sources for add-ons than for platform deals. The parties need to appreciate the choices and how they impact deal dynamics.
  2. Is the seller rolling over equity? In addition to the many issues parties typically face with equity rollovers, there is one factor that is critically important and particular to add-ons.
  3. Who is negotiating on each side? People issues are always essential. Add-ons introduce special considerations due to the often differing experience levels and vantage points of buyers and sellers in these deals.

Download a PDF for a written description of the Top 10 Issues in Private Equity Add-On Deals and click here for a full-length Dealology video that goes deeper on these three issues and covers another seven. 

Related Contacts
Eric Schwartzman Partner, San Francisco
Related Practices & Industries

Private Equity Mergers & Acquisitions