This is the last note in the Notebook, and its job is different from the others. Rather than apply a single lens, it steps back to ask what the academic literature actually establishes about buy-and-build, where it is strong, and where the gaps are. The short answer is that the field is good at telling us that buy-and-build happens, how much, and what it costs, and much weaker at explaining the mechanism by which repeated acquisition keeps adding value instead of destroying it.
That asymmetry is worth naming precisely, because it is where the rest of this Notebook, and the research it accompanies, tries to contribute.
What the field establishes: private-equity value creation
The foundations are solid. Early accounts located the value of the leveraged buyout in governance and incentive discipline, the alignment of owners and managers and the discipline of debt on free cash flow (Jensen, 1989). Later work organised the sources of buyout value into financial, governance, and operational engineering, with operational engineering, the industry and operating expertise a sponsor brings, emerging as the distinguishing capability of leading firms (Kaplan & Strömberg, 2009). And the returns themselves are real but heterogeneous and persistent across funds, which points to sponsor skill rather than luck (Kaplan & Schoar, 2005). On the economics of private equity, the field is on firm ground.
What the field establishes: the economics of buy-and-build
On buy-and-build specifically, the descriptive record is increasingly strong. Inorganic growth through add-ons has become central to the private-equity business model (Hammer et al., 2017), and the strategy can earn above-average returns despite premiums paid for add-ons, through a combination of top-line growth and multiple expansion, the familiar effect of buying small and selling big (Hammer et al., 2022). The conditions under which consolidation creates value, the industry and platform characteristics that make it attractive, have begun to be specified (Bansraj & Smit, 2017). The field can tell you that buy-and-build pays, roughly when, and through which financial channels. Notably, much of this evidence is drawn from European samples, leaving the larger and more add-on-intensive US market comparatively underexamined.
What the field underexplains: the mechanism
The gaps appear when the question turns from whether to how. Three are worth naming. First, target-selection research is built overwhelmingly on corporate acquirers and assumes strategic fit as the motive; it rarely accounts for the distinctive incentives and finite horizons of financial sponsors, and the recent move to theorise private equity as a specialised intermediary (Nary & Kaul, 2023) has not yet been brought to bear on add-on selection. Second, what work exists on private-equity selection examines investor preferences at the platform stage rather than the sequential add-on logic that defines buy-and-build (Osborne et al., 2012). Third, and most fundamental, the field models selection as a discrete, static event rather than the unfolding process it is in a sequence of deals (Welch et al., 2020), even though performance is best understood at the level of the acquisition programme (Laamanen & Keil, 2008). The result is a literature rich in outcomes and prices and thin on the mechanism that produces them.
A worked illustration: the question the field cannot yet answer
The gap is easiest to see as a question the existing evidence cannot resolve. Suppose two US building-products platforms run the same thesis over the same five years, pay similar multiples, and operate in the same fragmented market. One compounds; the other stalls after its fourth add-on. The financial literature can tell you the average platform in their cohort earned a given return through growth and multiple expansion. It cannot tell you why these two diverged, because the divergence lives in the mechanism: the accumulated integration capability, the recursive build-borrow-buy choices, and the way the selection criteria did or did not update across the sequence. Those are exactly the lenses this Notebook has applied, and exactly the variables the descriptive literature does not capture. The study that would answer the question is a process account of how selection actually unfolds, which is what the field still lacks.
What the field still needs
Four gaps, stated as an agenda rather than as claims:
A private-equity perspective on selection, built on sponsors’ incentives and finite horizons rather than imported from corporate-acquirer research.
Add-on-level study, examining how sponsors identify and prioritise add-ons over a hold period, not just how they choose platforms.
A process account, treating selection as a sequence in which each deal reshapes the criteria for the next, rather than as a discrete event.
US evidence, since the market where add-on activity is most intense is the one least examined.
Closing the Notebook
Read together, the seven notes make a single argument. Buy-and-build advantage is built, not bought (the resource-based view); platforms acquire rather than contract when ownership is the cheaper governance form (transaction-cost economics); selection is a resource-matching and integration decision, not a quality screen; the thesis forms through a deliberate-emergent process; integration capacity, not deal supply, is the binding constraint; and the optionality languageplatforms borrow from finance describes value but not mechanism. The literature establishes that buy-and-build works and what it costs. How it works, and why otherwise-similar platforms diverge, is the open question, and it is the question the research behind this Notebook sets out to answer.
References
Bansraj, D. S., & Smit, H. T. J. (2017). Optimal conditions for buy-and-build acquisitions [Preliminary version]. Erasmus School of Economics.
Hammer, B., Knauer, A., Pflücke, M., & Schwetzler, B. (2017). Inorganic growth strategies and the evolution of the private equity business model. Journal of Corporate Finance, 45, 31–63.
Hammer, B., Marcotty-Dehm, N., Schweizer, D., & Schwetzler, B. (2022). Pricing and value creation in private equity-backed buy-and-build strategies. Journal of Corporate Finance, 77, 102285.
Jensen, M. C. (1989). Eclipse of the public corporation. Harvard Business Review, 67(5), 61–74.
Kaplan, S. N., & Schoar, A. (2005). Private equity performance: Returns, persistence, and capital flows. The Journal of Finance, 60(4), 1791–1823.
Kaplan, S. N., & Strömberg, P. (2009). Leveraged buyouts and private equity. Journal of Economic Perspectives, 23(1), 121–146.
Laamanen, T., & Keil, T. (2008). Performance of serial acquirers: Toward an acquisition program perspective. Strategic Management Journal, 29(6), 663–672.
Nary, P., & Kaul, A. (2023). Private equity as an intermediary in the market for corporate assets. Academy of Management Review, 48(4), 719–748.
Osborne, S., Katselas, D., & Chapple, L. (2012). The preferences of private equity investors in selecting target acquisitions: An international investigation. Australian Journal of Management, 37(3), 361–389.
Welch, X., Pavićević, S., Keil, T., & Laamanen, T. (2020).The pre-deal phase of mergers and acquisitions: A review and research agenda. Journal of Management, 46(6), 843–878.