# Buy And Build Model

Show whether the roll-up is a trade or a business. This model buys a platform expensive and sixteen add-ons cheap, then charges the cost and the delay of integrating them against the arithmetic. The blended multiple paid across the whole programme is computed cumulatively every year and walks down from 10.50x to 8.87x even as each successive vintage is bought dearer than the last. Synergies are tracked by acquisition cohort and phase in over three years while the cost to achieve is spent up front, so reported margin dips before it recovers and a run-rate gap stays visible at exit. The exit bridge then splits the movement in equity value into purchase multiple arbitrage, operating value, re-rating and follow-on equity - 23% arbitrage against 71% operations on the shipped case.

- Canonical: https://finamodel.com/templates/buy-and-build
- Excel download: https://finamodel.com/templates/buy-and-build.xlsx
- Category: Private Equity
- Model type: Deal model
- Difficulty: Advanced
- Audiences: PE & buy-side, Investors & analysts, Private equity deal teams, Roll-up and platform investors, Investment committees and LPs, Corporate development teams
- Tags: buy-and-build, private-equity, roll-up, add-on-acquisitions, multiple-arbitrage

## Overview

A five-year private equity buy-and-build model built at the sponsor level rather than the operator level: a platform is bought expensive, sixteen add-ons are bought cheap, and the model's whole job is to show what that arithmetic is worth once the cost and the delay of actually integrating them are charged against it. The signature mechanic is the blended multiple paid across the entire programme, computed cumulatively each year as platform enterprise value plus capital deployed over platform EBITDA plus acquired EBITDA. It walks down from the 10.50x paid for the platform to 8.87x by exit - 1.63 turns of compression - even though every successive vintage is bought dearer than the last, at 5.75x rising to 6.75x, because the platform price is being averaged against ever more cheaply bought earnings. The second mechanic is a timing lag: synergies are tracked by acquisition cohort and phase in at 25%, 70% and 100% of run-rate over three years, while the cost to achieve them, 0.85x of the run-rate prize, is spent 60/40 across the first two years, so the bill always arrives before the benefit. Cumulative run-rate synergies reach 6,574 but only 5,423 are realised by exit, the last vintage still ramping, and 5,252 of integration cost has been expensed to get there. That lag is what pushes the reported EBITDA margin down from 13.5% at entry to 12.9% in Year 2 before it recovers to 13.7%, and it opens a 2,120 gap between reported and run-rate earnings that a buyer will argue about. The third mechanic is an exit bridge that separates arbitrage from operations rather than reporting a single value-creation number: 72,635 of purchase multiple arbitrage - what 15,570 of acquired EBITDA is worth at the 11.00x exit against the 6.33x blended price paid for it - against 228,711 of operating value from platform organic growth, realised synergies, integration cost and free cash flow, plus 16,825 of exit re-rating and 3,345 of follow-on equity, which is 23% arbitrage and 71% operations. Earnings are built additively so those sources stay separable, the platform's own margin walk is earned from four semi-variable cost lines rather than asserted, and the programme is funded through an explicit waterfall - cash, then a 0.75x delayed-draw basket carrying a ticking fee on the undrawn balance, then an 8,000 revolver, then a sponsor follow-on cheque - which is exhausted in that order and forces 3,345 of extra equity in Years 3 and 4. Four reconciliation rows tie the enterprise value bridge, the equity bridge, the net debt movement and the turns attribution to zero, and the deal returns 2.84x in aggregate and 2.61x to the sponsor at a 21.4% IRR over the five-year hold.

## What's included

- Platform entry: LTM revenue and gross margin, platform entry multiple, transaction and financing fees, minimum cash, management rollover
- Platform cost base: personnel, facilities and IT, sales and marketing, and overhead as shares of LTM revenue
- Platform plan: a per-year organic growth row, an annual gross margin gain, cost inflation and four line-specific revenue flex factors
- Add-on programme: per-year deals closed, average target revenue and target entry multiple, plus the target EBITDA margin and add-on transaction fees
- Synergies and integration: synergy run-rate as a share of acquired revenue, a five-year phase-in profile, the cost to achieve and its own spend profile
- Capital and working capital: opening net fixed assets, asset life, capex as a share of revenue, receivable and payable days
- Debt facilities: Term Loan B leverage, rate and amortisation, a delayed-draw acquisition basket with a ticking fee, a revolver, the cash sweep share, a leverage covenant and the tax rate
- Exit and incentives: exit EBITDA multiple and the management incentive pool
- Platform plan sheet: standalone revenue, gross margin, four cost escalators, operating expenses and platform EBITDA
- Acquisition programme sheet: deal flow by vintage, consideration and fees, and the cumulative blended multiple paid with its compression against the platform price
- Integration and synergies sheet: cohort run-rates and cost to achieve, synergy phase-in by cohort, realisation against run-rate, and integration costs by cohort
- Consolidated sheet: group revenue, the additive earnings build, reported against run-rate EBITDA, capital base and working capital
- Capital structure sheet: committed facilities, sources and uses balanced to zero, interest and taxes, free cash flow, and a step-by-step funding and sweep waterfall
- Exit bridge sheet: enterprise value bridge, equity value bridge, net debt reconciliation, and the arbitrage-against-operations split
- Returns sheet: ownership struck on cumulative contributions, sponsor cash flow, money multiple and IRR, and every bridge component restated in turns
- Dashboard: ten programme KPIs, a hold period summary, six trend charts and an entry-to-exit equity waterfall
- Six validation checks: sources and uses, the enterprise value bridge, the equity bridge, the net debt movement, the arbitrage split and the rebuilt money multiple

## Buy And Build Model: How Blended Multiples, Synergies And Exit Bridge Work

A buy and build model tests whether a platform-and-add-on programme is a genuine business or just a financing trade. This template captures how the blended multiple compresses as cheap add-ons are averaged against an expensive platform, how integration costs and synergy phase-ins create a margin J-curve, and how an exit bridge separates arbitrage from operating value.

Rates and financial results described here reflect illustrative model settings, not industry benchmarks.

### Operating Drivers: Deal Pricing, Cohort Synergies And Cost Timing

The programme buys one platform at a high entry multiple and add-ons at progressively higher but still much lower multiples. The key operating driver is not the exit multiple but the cumulative blended multiple actually paid across all transactions.

- That multiple averages the platform's expensive EBITDA against ever more cheaply acquired earnings, so it compresses even as each successive vintage is bought dearer than the last. Capital deployed includes add-on transaction fees, so the measure reflects what the sponsor truly spent.

- Synergies are tracked by acquisition cohort, not as a single group line. Each vintage brings its own run-rate prize and its own cost to achieve it.

The prize phases in at 25%, 70% and 100% across the close year and the two after it, while the cost is spent at 60% and 40% across the close year and the one after. This timing lag means cost always arrives before benefit, pushing reported margin down before it recovers and leaving unrealised synergy visible at exit.

### How The Calculation Flows: From Deal Flow To Earnings Build

The model flows from deal assumptions through acquisition, integration and consolidation. It computes the blended multiple each year as platform enterprise value plus cumulative capital deployed, divided by platform last-twelve-months EBITDA plus cumulative acquired EBITDA.

- It then builds reported EBITDA additively: platform EBITDA with its own margin walk, plus acquired EBITDA at the target's standalone margin, plus realised synergies, minus integration costs. Keeping these sources separate lets the model calculate arbitrage exactly rather than infer it.

- The platform's own margin is earned, not asserted. Gross margin walks up by 30 basis points a year, and four operating cost lines escalate with inflation plus platform revenue growth multiplied by line-specific flex factors.

- The resulting cost ratio shows mild operating leverage. Acquired revenue is held at the run-rate it was bought at and does not grow organically; only the platform compounds.

Exit is struck on reported EBITDA, with unrealised synergy disclosed as a memo rather than capitalised.

### Outputs: Blended Multiple Compression, Run-Rate Gap And Exit Attribution

The headline output is the cumulative blended multiple, which walks down from the platform price to a lower blended figure by exit, delivering multiple compression even though each vintage is bought dearer. A second output is the run-rate gap: the difference between run-rate EBITDA, which assumes full synergies and no integration cost, and reported EBITDA.

- This number quantifies the timing lag a buyer will question.

- The exit bridge splits the movement in equity value into four components: purchase multiple arbitrage, operating value, exit re-rating and follow-on equity funded. Arbitrage is the acquired EBITDA valued at the exit multiple less what was paid for it; operations covers platform organic growth, realised synergies, integration costs and free cash flow.

The share of arbitrage versus operations reveals whether the programme is primarily a financing trade or a business.

### Practical Use: Funding The Programme And Interpreting The Split

The programme is funded through an explicit waterfall: cash before facilities, then delayed-draw drawdown, revolver drawdown, sponsor follow-on equity as the uncapped backstop, then cash available for sweep. Each step is guarded so facilities cannot be over-drawn or over-repaid.

- The delayed-draw tranche carries a ticking fee on undrawn commitment and amortises on cumulative drawn amounts. Interest is struck on opening balances, keeping the schedule acyclic.

- This structure is designed to show a programme outrunning its debt basket, with follow-on equity funding the gap. Ownership is struck on cumulative equity contributed, so management rollover dilutes when sponsor follow-on is added.

Use the model to test whether blended multiple compression survives higher add-on pricing, how much synergy remains unrealised at exit, and what proportion of value creation comes from arbitrage versus operations. Net debt may rise over the hold because cash flow is spent buying earnings rather than deleveraging.

## A blended price that compresses as the programme runs

The multiple paid across the whole programme is struck cumulatively every year, not once at the end. It walks from the 10.50x paid for the platform down to 8.87x by exit, and a compression row states the 1.63 turns against the platform price so the value of the averaging is a number rather than an impression.

## Integration on the clock it actually runs on

Synergies are tracked cohort by cohort and phase in over three years while the cost to achieve is spent across the first two. The reported EBITDA margin therefore dips from 13.5% to 12.9% before recovering to 13.7%, and a run-rate gap of 2,120 is still open at exit - the shape a real buy-and-build makes, not a straight line.

## Arbitrage on one line, operations on the next

The exit bridge reconciles enterprise value, then equity value, then opens the movement in net debt into free cash flow, add-on capital deployed and follow-on equity. It closes with the split the model exists for: 72,635 of purchase multiple arbitrage against 228,711 of operating value, 23% and 71% of the movement in equity value.

## Workbook structure

### Cover

Workbook overview, sheet legend, units, and tab-colour key.

- Title and scope framing
- Sheet-by-sheet purpose summary
- Units and tab-colour legend

### Dashboard

Ten programme KPIs, a hold period summary, six charts and the entry-to-exit waterfall.

- Platform enterprise value, equity invested and add-ons completed
- Capital deployed, the blended multiple paid and the compression against the platform price
- Purchase arbitrage, operating value created, sponsor money multiple and sponsor IRR
- Charts for revenue and margin, the blended multiple path, EBITDA by source, reported against run-rate, capital deployed, and net debt and leverage
- Entry to exit equity value waterfall across all nine components

### Assumptions

Every driver in one sheet: platform entry, cost base, plan, programme, synergies, capital, facilities, exit.

- Platform revenue and gross margin, entry multiple, transaction and financing fees, minimum cash, rollover
- Four platform cost lines as shares of LTM revenue
- Per-year organic growth, an annual gross margin gain, cost inflation and four revenue flex factors
- Per-year add-ons closed, average target revenue and target entry multiple, plus target margin and deal fees
- Synergy run-rate, a five-year phase-in profile, the cost to achieve and its spend profile
- Opening net fixed assets, asset life, capex share, receivable and payable days
- Term Loan B, a delayed-draw basket with a ticking fee, a revolver, the sweep share, a leverage covenant and the tax rate
- Exit multiple and the management incentive pool

### Platform_Plan

The platform on its own: revenue, gross margin, four cost lines and EBITDA across entry and five years.

- Platform revenue compounds organically with no acquired revenue anywhere in it
- Gross margin walks up by a fixed annual gain from the entry level
- Four cost escalators run at inflation plus a line-specific share of revenue growth
- The operating cost ratio falls from 25.00% to 24.71%, so leverage is earned rather than assumed
- Platform EBITDA margin rises from 13.5% to 15.3% as a consequence, never as an input

### Acquisition_Program

Deal flow by vintage, consideration and fees, and the cumulative blended multiple paid.

- Deals closed times average target revenue gives acquired revenue by vintage
- Cumulative acquired revenue and acquired EBITDA at the target standalone margin
- Consideration at the vintage multiple, plus deal fees, gives capital deployed
- Programme price paid over programme EBITDA acquired gives the blended multiple, and its compression against the platform price
- The blended add-on multiple and the arbitrage turns available at the exit multiple

### Integration_Synergies

Cohort run-rates and cost to achieve, synergy phase-in, realisation, and integration costs by cohort.

- Each vintage carries its own run-rate synergy and its own cost to achieve
- Five cohort rows phase the prize in at 25%, 70% then 100% of run-rate
- Realised synergies against full run-rate, with the shortfall and the realisation percentage stated
- Five cohort rows spend the cost to achieve 60/40 across the close year and the one after
- Cumulative integration cost across the hold

### Consolidated

Group revenue, the additive earnings build, reported against run-rate EBITDA, capital base and working capital.

- Group revenue is platform revenue plus every add-on ever bought, held at its acquired run-rate
- Reported EBITDA is platform plus acquired plus realised synergies less integration costs, so each source stays separable
- Run-rate EBITDA is the same build without the lag or the cost, and the gap between them is stated
- Fixed assets roll forward with capex and straight-line depreciation to EBIT
- Receivables on revenue days and payables on the operating cash cost base, with the change in working capital

### Capital_Structure

Committed facilities, sources and uses, interest and taxes, free cash flow, and the funding and sweep waterfall.

- Financing fees are struck on committed facilities including the undrawn acquisition basket
- Sources and uses balance to zero, splitting funded debt from the equity cheque, rollover and sponsor equity
- Interest on opening balances plus a ticking fee on the undrawn basket and a commitment fee on the revolver
- Free cash flow after interest, cash tax, capex and the change in working capital, and the cash flow left after add-ons
- A capped waterfall through cash, the delayed-draw basket, the revolver and a sponsor follow-on cheque
- A guarded sweep back through the revolver, the delayed-draw and Term Loan B, with net leverage and covenant headroom

### Exit_Bridge

Enterprise value bridge, equity value bridge, net debt reconciliation, and the arbitrage-against-operations split.

- Equity marked at the entry multiple in Years 1 to 4 and at the exit multiple in Year 5
- Five components close the enterprise value bridge on the exit valuation exactly
- The equity bridge opens the movement in net debt into free cash flow, add-on capital deployed and follow-on equity
- A net debt reconciliation proves those three lines are the whole of the movement
- The split: purchase multiple arbitrage, operating value created, exit re-rating and follow-on equity, with shares of the total

### Returns

Ownership on cumulative contributions, the sponsor cash flow stream, return metrics and attribution in turns.

- Exit equity less the management incentive pool, split between sponsor and rollover
- Ownership struck on cumulative equity contributed, so the sponsor-funded follow-on dilutes the rollover
- A sponsor cash flow stream with the entry cheque, the follow-on cheques and exit proceeds, feeding IRR
- Sponsor money multiple and IRR alongside the aggregate equity multiple and value created
- Every bridge component divided by invested equity and summed back to the money multiple

## Features

- **The blended multiple paid, struck every year:** Platform enterprise value plus cumulative capital deployed over platform EBITDA plus cumulative acquired EBITDA. It compresses from 10.50x to 8.87x across the hold even though each successive vintage is bought dearer than the last, because the platform price is being averaged against ever more cheaply bought earnings.
- **Synergies tracked by acquisition cohort:** Each vintage carries its own run-rate prize and its own bill to capture it. The prize phases in at 25%, 70% then 100% over three years; the bill is spent 60/40 across the first two. The last vintage bought is still ramping at exit, so realisation lands at 82.5% and the shortfall is a number rather than a footnote.
- **Reported against run-rate EBITDA:** The same earnings build is run twice, once with the lag and the integration cost and once without. Reported margin dips from 13.5% to 12.9% in the busiest year before recovering to 13.7%, and the gap to run-rate is the exact quantity a buyer will argue about at exit.
- **Arbitrage separated from operations:** The exit bridge splits the movement in equity value four ways: what the acquired earnings are worth at exit less what was paid for them, what the platform and the integration team actually built, the re-rating, and the follow-on equity. On the shipped case that is 23% arbitrage against 71% operations.
- **A funding waterfall that can run out:** Cash, then a delayed-draw acquisition basket capped at its remaining commitment and carrying a ticking fee on the undrawn balance, then a revolver, then a sponsor follow-on cheque. On the base case the basket is exhausted in Year 3 and the sponsor writes 597 and 2,748 of extra equity in Years 3 and 4.
- **Ownership struck on cumulative contributions:** The follow-on cheque is funded entirely by the sponsor and ownership is recomputed on cumulative equity contributed, so the management rollover is diluted by money it did not put in. Return metrics are struck on the equity actually invested, not on the entry cheque.

## Use cases

- **Test whether the roll-up is a trade or a business:** Read the arbitrage share against the operations share. A programme that is mostly arbitrage is a financing trade that depends on the spread staying open; one that is mostly operations survives a compressed spread. The split is a single line rather than an argument.
- **Price how much integration delay actually costs:** Move the phase-in profile and the cost-to-achieve multiple and watch reported EBITDA, the run-rate gap and the exit valuation move with them. A programme underwritten on run-rate synergies and exited on reported earnings has a hole in it, and this is where it shows up.
- **Size the acquisition basket before the deal signs:** The funding waterfall is capped facility by facility, so cutting the delayed-draw commitment or the revolver pushes the shortfall into a visible sponsor follow-on cheque instead of a negative cash balance. Run the programme you want and see what it needs.
- **Judge whether paying up for the next deal still works:** Walk the per-vintage entry multiples up and watch the blended multiple stop compressing. There is a price above which the programme is no longer buying cheaper earnings than it owns, and the compression row tells you where it is.

## Frequently asked questions

### What is a buy-and-build model?

A buy-and-build model plans a private equity programme in which a platform business is acquired first and then a series of smaller add-ons are bought and folded into it. The economics come from three places: the platform's own growth, the difference between the multiple paid for the add-ons and the multiple the combined group is worth, and the synergies extracted from consolidating them. This model builds all three explicitly and keeps them separable through to the exit attribution.

### Why does the blended multiple compress even though each add-on costs more?

Because the blend is cumulative and the platform price is fixed. The platform is bought at 10.50x; the add-ons are bought at 5.75x rising to 6.75x. Every deal that closes below the running blend pulls it down, so even a programme paying steadily more for each successive deal keeps averaging down against the anchor price. Across the shipped case the blend falls to 8.87x, 1.63 turns of compression.

### Why do synergies phase in rather than land at close?

Because they do not land at close. Systems migrations, supplier renegotiations, branch consolidations and back-office rationalisation take one to three years, and the cost of doing them is incurred first. This model tracks synergies by acquisition cohort so each vintage ramps on its own clock, which means the last deals bought are still ramping when the sponsor sells: 5,423 of 6,574 run-rate synergies are realised at exit, and 5,252 of integration cost has been spent getting there.

### Why is exit struck on reported EBITDA rather than run-rate?

Because a buyer pays for what the business earns, and pretending otherwise flatters the return by about 23,000 of exit enterprise value on this case. The 2,120 gap between reported and run-rate earnings is disclosed as its own line so the negotiation is visible rather than assumed away. If you want to underwrite on run-rate, point the exit valuation at that row and the difference is immediate.

### How is arbitrage separated from operating value?

Arbitrage is what the cumulative acquired EBITDA is worth at the exit multiple less what was actually paid for it, including deal fees. Operating value is platform organic growth, realised synergies, integration cost and free cash flow generated. The two, plus the platform re-rating and any follow-on equity, sum exactly to the movement in equity value, and a check row proves it. On the shipped case that is 72,635 of arbitrage against 228,711 of operating value.

### Why does net debt rise over the hold?

Because a buy-and-build does not deleverage in absolute terms; it spends its cash flow buying earnings. Net debt goes from 97,275 to 111,020 while net leverage falls from 4.00x to 2.07x, which is entirely a denominator effect. The model makes this explicit by opening the movement in net debt into free cash flow generated, add-on capital deployed and follow-on equity funded, each as its own line.

### Can I use this for my own programme?

Yes. Every driver is a labelled input on the Assumptions sheet wired through named ranges, so you can replace the platform revenue, margin and entry multiple, the organic growth path, the deals closed and average target size by vintage, the target multiples and margin, the synergy run-rate and phase-in, the cost to achieve, the debt facilities and sweep, the exit multiple and the incentive pool with your own. Six validation rows tell you immediately whether the bridges still foot.

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