“It’s been a relatively slow year for us,” one managing partner related to us recently. His middle market private equity firm had just completed a successful fundraise, but was finding investing opportunities scarcer than last year. “We’ve only completed four new platform buyouts.”

Then he smiled. “But we have done eighty-seven add-ons.”

The prevalence of add-on acquisitions – variously called “roll-ups,” “bolt-ons,” “tack-ons” and “tuck-ins” – has increased over the past several years in leveraged finance. Private equity sponsors are increasingly taking advantage of (or being compelled by) market conditions to drop smaller companies onto their existing platform businesses.

There are several reasons for this. First, purchase price multiples for new buyouts have remained at lofty levels. According to S&P LCD, middle market prices as a multiple of ebitda are 10.7x through September 30. This is up over a turn from the full year 2015 number. That’s identical to the multiple sponsors pay for large cap LBOs.

With that kind of price going in, it’s a lot tougher to meet a twenty-something hurdle rate on an exit, particularly in the low growth economic environment we’ve seen since the recovery began six years ago.