The process of identifying successful add-ons is a complex one. Each sponsor has developed over the years a different style and methodology depending on their investing approach. As we’ve noted, it’s also very sector-specific. Not every portfolio company needs to, or should, have the same acquisition strategy.

One partner walked us through two scenarios. “We have one company in the logistics space. Our management team has doubled ebitda over the past four years, mostly through organic growth. They’ve only done two add-ons during that time.

“By contrast,” he went on, “we have a building products business that’s a leader in its space. They have earned a reputation as an acquirer. Smaller competitors eventually realize that you need scale in this business, or you’re eventually toast. People come to us when they realize there’s no other way out.”

Which leads us to the question, how do you help sellers get comfortable that your firm is the right fit for them?

The mid cap PE managing director told us bankers can be helpful. “Some of these companies will hire an advisor after the fact to help them through the process,” he said. “We actually encourage that. It helps them get to the finish line.”