Buy-and-Build in Germany: How Add-on Acquisitions Change the Platform Structure

The first add-on shows how well the original platform structure works for a buy-and-build strategy.

Each subsequent acquisition builds on existing ownership arrangements, financing, governance and tax structures.

The starting point for the next transaction is therefore shaped by the acquisitions already completed.

The first add-on expands the existing platform structure

A platform acquisition can be structured around a single target.

The first add-on requires the existing platform structure to accommodate another business acquisition.

The choice of acquiring entity determines how the acquired company or business is integrated into the existing group and influences the acquisition financing structure.

That integration also affects subsequent acquisitions. Each additional business acquisition changes the structure into which the next target needs to be integrated.

Existing financing arrangements affect subsequent acquisitions

An add-on is financed within an existing capital structure.

Bank financing at platform level can contain covenants, security arrangements and restrictions on distributions. Seller loans from previous transactions may still be outstanding. Existing equity can already carry governance and information rights.

These arrangements can affect the financing capacity available for the next acquisition.

A further add-on can therefore require financing measures across several levels of the group, including the acquiring entity, existing holding companies and operating companies.

Financing agreed for an earlier transaction remains relevant for later acquisitions.

Seller rollovers change the shareholder structure across transactions

A seller rollover gives the seller an economic interest in the ownership structure following closing.

Across several add-ons, different sellers can hold interests at different levels of the group.

A rollover at target level creates different economic and corporate rights from an investment at a higher holding-company level. Information rights, consent rights, distributions and exit arrangements follow the relevant ownership level.

Several seller rollovers can therefore bring different shareholder interests into the same platform structure.

The existing shareholder structure becomes part of the analysis for the next acquisition.

Governance created in earlier transactions can become relevant for new deals

Governance rights can exist at several levels of the platform.

Investors, co-investors and sellers with rollover investments can hold information and consent rights. Financing agreements can create additional approval requirements.

These rights can become relevant again when the platform pursues another acquisition.

A new transaction may therefore require approvals across several levels of the group. The relevant approvals follow from the existing ownership and financing structure.

The platform's ability to execute further acquisitions can also depend on whether these governance arrangements remain workable.

Tax decisions from earlier transactions remain part of the platform

Each add-on acquisition involves its own tax risks and structuring decisions.

Tax Due Diligence identifies and assesses tax exposures that may affect the purchase price, transaction documentation and acquisition structure.

Following closing, additional tax relationships arise within the existing group structure.

Intra-group financing, distributions, profit appropriation and existing tax positions can become relevant for the newly acquired business.

The choice of acquisition vehicle also affects the subsequent ownership and financing structure.

After several add-ons, the platform's tax structure reflects a series of connected transaction decisions.

Accounting & Reporting affect the next acquisition

Each add-on introduces additional accounting and reporting processes into the group.

Different charts of accounts, closing processes and reporting standards can reduce comparability across the platform.

Management, investors and financing providers need financial information that can be assessed consistently across the group.

This also affects the preparation of subsequent acquisitions. Liquidity, leverage, earnings development and available financing capacity need to be visible at platform level.

Accounting & Reporting therefore form part of the infrastructure supporting further transactions.

Previous transactions shape the next add-on

After several acquisitions, the platform reflects the legal, tax and financing decisions made in earlier transactions.

A new target enters that existing structure.

A robust buy-and-build structure keeps ownership arrangements, financing, governance, tax and reporting understandable as the platform grows.

The next acquisition needs to work within that structure without requiring existing rights and financing relationships to be reorganised for every add-on.

CLIQ advises buy-and-build platforms on platform and add-on acquisitions and on the ongoing corporate, tax and accounting development of the group.