What does 'multiple pickup' mean in the context of Buy-and-Build?
Multiple pickup is the multiple advantage a larger platform earns over individual add-ons. A $50m-EBITDA platform trades in the middle market at a premium to a $20m asset, because the buyer pool and liquidity increase.
a middle-market platform below $25m EBITDA at 9.0x, above $50m EBITDA at 11.0x. Over a 5-year hold period the multiple pickup can be +1.5–2.5x — a substantial component of Buy-and-Build returns.
Deep diveShow more details
| Stage | EBITDA | Multiple | EV |
|---|---|---|---|
| Platform Year 0 | $20m | 9.0x | $180m |
| Platform + add-on 1 (+$5m) | $25m | 9.3x | $232m |
| Platform + add-on 2 (+$8m) | $33m | 10.0x | $330m |
| Platform Year 5 (organic + all add-ons) | $50m | 11.0x | $550m |
| Factor | $20m EBITDA | $50m EBITDA |
|---|---|---|
| Buyer pool | Regional + mid-PE | International + large-PE |
| Liquidity | less | more |
| Strategic optionality | limited | high (IPO, strategic sale) |
| Execution risk | higher | lower |
at +2x multiple and $50m EBITDA = +$100m EV from the pickup alone. Real, but not guaranteed — in a bear-market exit it can partly disappear.
Question: "Why should a platform earn a premium multiple?"
Answer: "Size effect plus strategic optionality. $50m EBITDA is a 'real' mid-cap in the middle market — the buyer pool shifts from regional PE to international strategics. 11x vs 9x is market reality, not wishful thinking"