What does the 'buy and build' strategy in mergers and acquisitions involve?

The 'buy and build' strategy in mergers and acquisitions specifically involves the integration of smaller companies to create value and achieve economies of scale. This strategy allows a company to accelerate growth by acquiring multiple smaller firms, which can complement or enhance its existing operations. The process often entails not just acquiring these companies, but also actively working to integrate them into the parent company to enhance overall effectiveness, streamline operations, and expand market reach.

This approach is particularly valuable in industries where scale can lead to a competitive advantage, as combining resources and capabilities can result in improved profitability, enhanced product offerings, and increased market share. By building a larger entity through strategic acquisitions, the acquirer can leverage synergies, such as shared technologies, combined supply chains, and consolidated administrative functions, leading to greater efficiency and innovation.

While competitor acquisition could be part of a buy and build approach, the core of the strategy is more about integrating smaller entities to drive growth rather than merely acquiring competitors. Additionally, reducing operational costs through layoffs or focusing heavily on research and development, while they may be relevant in a broader corporate strategy context, do not capture the essence of the buy and build model as accurately as the integration focus does.