“Doubt is not a pleasant condition, but certainty is absurd.” –Voltaire

The story of value is the story of private equity. How these firms have grown businesses and sold them for superior shareholder returns is about value creation. The paths to creating value and achieving these returns differ for each sponsor.

As we discussed last week, one of the key strategies for better valuations, in the current environment of high purchase price multiples, is the “buy-and-build.” Incremental add-ons at lower multiples help reduce the effective multiple at exit.

In an excellent 2018 Bain study [link], add-ons are identified as enhancing valuations when interest rates and GDP growth alone are insufficient to reach desired returns.