ASTORG, the LBU investor

Definition of LBUs

Leveraged Build-Ups (LBUs) are buyout transactions where the initial acquired company serves as a platform for further acquisitions, generally to create a strategically valuable market share or to consolidate a mature industry. Such build-up constructions, also known as "buy and build" strategies among the private equity community, also make use of bank acquisition finance to fund the add-on acquisitions; hence the Leverage Build-Up label.

LBUs aim at creating platforms designed to structurally generate profitable growth, through a subtle combination of organic growth and add-on acquisitions. Consolidated revenues can be multiplied several times by the build-up exercise, whilst synergies extracted from the acquisitions and production rationalization flow down the P&L of the newly formed group to improve its operating margins. Buy-and-build strategies ultimately enhance the consolidated group's value through both accelerated market share gains and improved profitability.     

How LBUs can rapidly create shareholder value

The value created by the implementation of a buy-and-build strategy derives from the combination of the following 3 factors :

- Multiple increase : valuation multiples applied to the newly built group are greater than the implied multiples paid for each individual acquisition, reflecting the progressive recognition of the strategic premium attached to a greater market share. 

- EBIT margin growth : through a better coverage of fixed costs, and the uncovering of synergies.

- Leverage : through debt used to acquire the platform as well as add-on acquisitions.

Sharp and specific investor skills are required

Buy-and-Build strategies require:

- an investment team as strongly committed to growth as the platform management team,

- an investment team dedicated to providing frequent advice and being available to support the company's management team,

- preliminary experience of the risks associated with such complex ventures,

- sharp negotiation and financial engineering skills to structure multiple acquisitions within a short timeframe,

- a strong financial partner capable of infusing additional capital according to development needs.

ASTORG has the experience, the skills and the financial resources to match these constraints, as illustrated by the numerous LBUs it has achieved : Régie Linge, Sephora, Socs, Prat, Marc Orian, Agio Lowendal, Groupe Fremaux, …