Igor Zax, Managing Director of Tenzor Ltd., chaired Private Equity Deal Origination Conference 25 November 2015. The event was hosted by IIR/Informa and featured will major PE houses such as Bain Capital, LDC, Riverside, and August Equity, as well as Houlithan Lokey, Cavendish Corporate Finance, KPMG, Grant Thornton, White and Case and others. Igor Zax also presented a panel on Buy and Build Strategies, talking about successful identification of platform companies, putting together effective management teams, financing initial purchase and add-on acquisitions.

1. Buy and Build Strategy- Keys toBuy and Build Strategy- Keys to
SuccessSuccess
Igor Zax, CFA, Sloan Fellow (LBS)
Managing Director- Tenzor Ltd
© Tenzor Ltd 2009-2015
www.tenzor.co.uk
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2. Buy and Build- Still relevant in theBuy and Build- Still relevant in the
Modern World?Modern World?
 Roland Cause (Nobel Prize in Economics 1991)- the only
reason firm exists is because of transaction costs-modern
technology drives costs down
 Company "Produces nowhere but sells everywhere...
know where the clients are and what they want and where
the producers are. Platform companies then simply
organise the ordering by the clients and the delivery by the
producers (and the placing of their logo on the product just
before delivery).“- GaveKal
 Public companies splitting (HP, GE, etc.)
© Tenzor Ltd 2009-2015
www.tenzor.co.uk
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3. Buy and Build- Key DriversBuy and Build- Key Drivers
 Exit Strategy focused “Farming”. Larger size opens sale to
investors (financial and strategic) which have no resources
to deal with smaller transactions. Needs to be focused on
exit needs
 Efficient Sales channel. One of the companies (acquirer or
acquired) has massively more efficient sales channel in
particular market- full replacement vs. attempt to merge.
Key factor is improving utilisation of existing channels.
 Capacity utilisation- manufacturing. Ability to centralise
manufacturing- effectively buying just sales, servicing and
R&D
© Tenzor Ltd 2009-2015
www.tenzor.co.uk
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4. Buy and Build- Key DriversBuy and Build- Key Drivers
cont.cont.
 Vertical integration- especially where there are bottlenecks
within industry verticals.
 R&D driven acquisition- providing acquirer can integrate
without destroying the culture or loosing key people
 Back office synergy- need to be benchmarked against
BPO, rarely may be a key driver
 Procurement efficiencies- normally where is a size
difference and significant product overlap
 Financing efficiencies- platform company needs to have a
scalable structure
© Tenzor Ltd 2009-2015
www.tenzor.co.uk
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5. Five “C’s” for Buy and Build TeamFive “C’s” for Buy and Build Team
 Control
– Efficient control of merged entity without “killing its soul”
 Capability
– The team (existent, new or interim) needs to be capable to manage
scale up
 Credibility
– Strategy and the team need to have credibility with all stakeholders
 Clarity
– Understanding the company’s core business, how it fits with the
industry structure and does the combined business model match it
 Co-operation
– Ongoing support from suppliers, customers, distributors and others
are vital to support the strategy
© Tenzor Ltd 2009-2015
www.tenzor.co.uk
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6. Financing Scalability-Financing Scalability-
backbone of buy and buildbackbone of buy and build
 Cash flow lending may be efficient for original purchase,
but relatively difficult to scale
 Asset based structures with robust infrastructure allow
easier “digestion”
 Receivable deals “auto-scale” with extra revenue
 Credit insurance helps to standardise portfolio and may be
an efficient tool to pre-screen acquisition for inclusion
 On distressed acquisitions, just payables extension often
provides critical financing
 Cross border arbitrage- riskier countries
© Tenzor Ltd 2009-2010
www.tenzor.co.uk
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7. Thank You and Good Luck!Thank You and Good Luck!
Igor Zax, CFA, Sloan Fellow (London
Business School)
Managing Director, Tenzor Ltd. (London)
Tel: +447775708426
E-Mail: igor.zax@tenzor.co.uk
Web site: www.tenzor.co.uk
© Tenzor Ltd 2009-2012
www.tenzor.co.uk
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