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Add-On Acquisition

Definition - What does Add-On Acquisition mean?

An add-on acquisition refers to a company that is added by a private equity firm to one of its platform companies, or by a strategic buyer pursuing a consolidation investment strategy. Typically, the acquirer will already have the management capabilities, infrastructure, and systems that allows for organic or acquisitions growth. The add-on acquisitions can provide complimentary services, technology, or expansion into the existing geographic footprint that can be quickly integrated into the existing infrastructure. A larger add-on target might also bring some diversification of products, geographies, and customers which would further extend the reach of the buyer.

Divestopedia explains Add-On Acquisition

Similar to a bolt-on or tuck-in, an add-on acquisition can refer to acquisitions of smaller companies with very little financial and administrative infrastructure. Given the lack of infrastructure, acquirers will usually pay lower end valuation multiples for add-on acquisitions.

Unlike a bolt-on or a tuck-in, an add-on acquisition can also refer to the acquisition of a larger company that provides diversification to an existing business. The add-on business could have strong infrastructure and management teams, and in some instances might be seen as a synergistic purchase by an acquirer. In this case, an add-on acquisition could fetch a premium valuation in the marketplace.
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