“Driving” Value: Why Proper Integration is Critical to PE Returns

When a golfer buys a new driver, they can’t expect to walk onto the course and immediately hit the perfect shot. It takes time to understand the club, adjust the swing and integrate it into the overall game. Each club in the bag has a specific purpose, but performance only improves when every club works together as part of a cohesive system built through practice, discipline and commitment.

Completing an add-on acquisition in private equity is no different. According to CBIZ’s Q2 2025 M&A update, add-ons accounted for 76% of PE buyouts by deal count in that quarter, underscoring the importance of private equity (PE) firms being able to effectively integrate them. PE platforms can’t simply buy a new company and expect immediate value creation. The real work begins after close: evaluating fit, aligning operations and culture, and intentionally integrating the new asset into the broader platform to drive sustainable, long-term value.

Choosing the Right Club: Identifying the “Why”

Before purchasing a new club, a golfer asks: Why do I need this? Is it for more distance off the tee? Better accuracy? The ability to adapt to windy conditions? Without a clear objective, even the highest-grade club risks sitting unused.

Similarly, private equity firms must define the strategic rationale for an add-on acquisition:

• • • • • Is it meant to expand geographic reach — like adding a driver for longer holes?
        • Does it add complementary capabilities — like a wedge for precision shots?
        • Is it intended to consolidate in a fragmented industry — like a hybrid club for versatility?

Synergies & Return Drivers: Ensuring the Clubs Work Together

Selecting the wrong club for a shot can throw off your whole game; likewise, a poorly integrated add-on can disrupt platform performance. Successful integration is like ensuring your irons, wedges and woods complement each other to create a seamless game plan that drives value across the course.

When looking to improve, a golfer doesn’t need to purchase an entirely new set of clubs. Sometimes buying one strategically selected club can round out their entire game. Multiple arbitrage in private equity works similarly. Firms can buy a company at a lower valuation, but when combined with the larger platform it experiences a significant uplift in valuation (“arbitrage”), even before any operational improvements.

After purchasing, a golfer must examine how the new club complements the current set. It comes down to synergies, just as add-on acquisitions must be evaluated for synergies with the existing platform. There may be shared back-office functions, procurement leverage and consolidated systems, all of which lower combined SG&A and improve margin. Additionally, there may be the opportunity to cross-sell customers with additional services, introduce new offerings or expand geographic reach, enabling the parent platform to grow the top line.

A peer-reviewed study found that buy-and-build (B&B) strategies, which rely heavily on integrating add-on acquisitions into parent platforms, yielded significantly higher returns than other types of M&A. This underscores that the combination of operational improvements, multiple arbitrage and scale creates much higher valuation than traditional leveraged buyouts.

Execution: Keeping Score and Adjusting Your Swing

Tracking performance after an add-on closes is where most value is won or lost. Like a golfer who evaluates every shot, PE firms must measure integration progress in real time and adjust their approach before small issues compound into missed targets.

Successful integrators follow a disciplined process:

Set KPIs from Day One

Define specific metrics tied to the add-on: cost synergies, cross-sell revenue, headcount reductions or realignments, customer retention, EBITDA margins, etc.