What is a platform company?

A platform is usually chosen for its management team, systems and capacity to integrate acquisitions, not only for its standalone earnings. Acquisition financing is often arranged up front, for example as a delayed-draw term loan. Buy-and-build is the common label for the strategy. A platform is often confused with a portfolio company in general, though not every holding is meant to grow by acquisition.

Say a firm buys a regional dental chain as a platform, then adds 10 smaller practices over four years before selling the larger group.

A good platform lets a firm buy smaller rivals cheaply, so the bigger company can be sold for more.

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