Definition - What does Tuck-In Acquisition mean?
A tuck-in acquisition refers to a company that is acquired by a platform company that is usually backed by private equity. The term, tuck-in, refers to the idea that the acquisition is being "tucked in" under the infrastructure of the platform company.
When private equity enters a market, it may do so by acquiring a larger company with management and infrastructure capable of absorbing other smaller players. This larger company serves as the platform, and then tuck-in acquisitions are completed to add to the geographic footprint or add complementary services or technology. Tuck-in acquisitions usually have a strong owner, but limited management depth or administrative resources to continue growing, which makes them ideal for larger platform companies to absorb.
Divestopedia explains Tuck-In Acquisition
While a tuck-in acquisition may work for a seller who is looking to let go of all administration, the process represents a considerable change. The platform company will look to integrate a tuck-in company as quickly as possible into common accounting systems, treasury and operating procedures. Usually, a quick integration win is to revise the pricing of products or services up to the platform company's rate sheet.
While changes are aimed at creating value in the long run, the owner of the tuck-in company needs to be prepared for the significant change that occurs in the first year, and ensure that he/she manages appropriately how the rest of the employees will react to the integration process.