Why Most Buy-and-Build Strategies Fail in Year Two - And What I Learned the Hard Way

By Lasse Mäkelä, Founder, Larzon Capital

Every buy-and-build strategy looks brilliant in the investment committee deck.

A platform company, a fragmented market, a tidy list of attractive add-ons, and a thesis on multiple arbitrage so elegant it almost apologises for itself. On paper, the maths is borderline embarrassing.

Then year two happens.

For the first part of my career, at Investment Banking, I looked at acquisitions the way most advisors do: as transactions. Valuations, structures, due diligence, signing. I was confident, well-trained, and, looking back, politely oblivious to the fact that the deal closing is roughly chapter one of a fairly long book.

What changed my view was moving inside platform companies. At KONE, Consti, Invesdor (where we acquired an Austrian platform called Finnest), and Multitude, and now at Morgon Equity Partners, I saw acquisitions from the operating side, where you don't get to wave goodbye after the wire transfer clears. You stay. And four patterns kept showing up.

1. The integration capacity gap

The first deal is exciting. The second is manageable. By the fourth, the platform CEO is doing nothing but integration and quietly wondering when she last visited the largest customer.

The investment case assumed she would do both. The reality is that nobody can.

The platforms that get this right build a dedicated integration capability before the second deal, not after the fifth one breaks something. That can be an internal team, an operating partner from the sponsor, or an interim executive who carries the playbook between deals. The cost looks like overhead. It is in fact cheap insurance.

2. Synergies that exist in the spreadsheet but not in the org chart

Most investment cases promise procurement savings, cross-selling, and platform consolidation. These synergies are real. The problem is that capturing them requires the acquired company to change, and change requires authority, sequencing, and someone with the bandwidth to drive it.

The pattern is depressingly familiar. The acquired company is told it will "keep its autonomy" — a phrase that ages roughly as well as a banana. Twelve months later, it's asked to migrate ERP, adopt central procurement, and harmonise pricing. By then the original management has either checked out or left.

A €2 million synergy delivered cleanly in month nine beats a €5 million one projected for year three that never arrives.

3. Financing the journey, not just the first deal

Buy-and-build is capital-hungry. The platform closes, debt is drawn, equity is committed, and then a larger add-on appears. Then another. Then rates move. Then the original capital structure starts to creak.

The strategy isn't usually wrong; the financing is just sized for chapter one. Successful platforms plan debt headroom, equity reserves, and refinancing milestones as part of the strategy itself, not as a treasury problem to be solved later, ideally on a Friday afternoon.

4. The cultural arithmetic nobody puts in the model

This is the one that quietly humbles experienced investors.

When you acquire a founder-led company in another country or even in your own country, you don't just buy a P&L. You inherit a relationship between the founder and the team, between the team and its customers, and between the company and its local market. None of that is in the spreadsheet, all of it matters.

When we acquired Finnest from Vienna into Invesdor Group, the financial logic was straightforward. The cultural translation, Austrian and Finnish teams suddenly running one platform, was where the actual work happened. Nothing in my Merrill Lynch training had prepared me for the importance of the first ninety days of listening. The operating years taught me.

This is also the area where, at Morgon Equity Partners, we are putting serious effort. Acquisitions and their integrations only works when the cultural integration is treated as a discipline, not an afterthought, and our investment approach reflects that conviction.

The platforms that get this right tend to slow down deliberately in the first quarter, and to identify early which acquired-company practices are actually better than the platform's own. Not every difference is a problem to be solved.

Why this matters now

The European mid-market is unusually well-suited to buy-and-build right now: fragmented sectors, a retiring founder generation, attractive entry multiples versus the US, and plenty of capital looking for deployment.

The strategic logic is sound. The gap between a good thesis and a successful platform is mostly operational, not strategic, and that gap is exactly where decades of inside experience earns its keep.

It is also, conveniently, why I do this work.

Larzon Capital advises European mid-market companies on cross-border M&A, corporate finance, and buy-and-build strategy. If you are building a platform, evaluating an acquisition, or quietly worrying about one you've already made, I'd be glad to have a confidential conversation.