The upside of a challenging market is the inspiration to do things differently. As buyers and sellers approach transactions more creatively, bolt-on acquisitions have emerged as a popular strategy. According to a recent KPMG study, bolt-ons accounted for 56% of private equity deals and 44% of corporate deals in 2024.
Bolt-on acquisitions require substantial preparation and planning at both the pre-deal and post-deal stages. To lay a strong foundation for due diligence and post-deal integration, you need to understand what bolt-ons are, what benefits they bring, and how the right VDR platform helps you execute effectively.
What are bolt-on acquisitions?
For anyone new to the bolt-on, they are what they sound like. A bolt-on describes the process of acquiring and integrating a smaller company into an existing business. The acquisition brings a benefit to the business, such as a new or expanded product line, access to a new market or geographic territory, or a new audience and customers.
Parties to a bolt-on, the acquirer and the acquired, are usually in the same industry. For instance, a graphics software company might bolt on a smaller software developer to add a unique AI feature to its platform. If they’re from different industries, there must be a synergistic relationship between the two. A well-known bolt-on example is Google’s 2021 acquisition of FitBit. The health tracker aligned with Google’s offerings and expanded its wearable technology into the wellness space.
Bolt-ons—sometimes also referred to as “roll-up” acquisitions—are not to be confused with tuck-in acquisitions. While they’re similar transactions, there are key differences.
| Tuck-in Acquisitions | Bolt-on Acquisitions |
| The parent or “platform” company integrates all systems and assumes the management of the tucked-in company | The bolted-on company often retains its existing management team |
| Complete absorption of the acquired company, i.e. no structure remains | More of a subsidiary relationship with the acquired company, i.e. the name is sometimes retained |
| Tuck-in company has few prospects of its own and needs management | The bolted-on company has prospects and the acquisition leverages the synergy |
Why are bolt-ons gaining popularity?
Last year’s economic climate proved difficult for many businesses, and the prospects for this year remain uncertain. According to PwC, the volume of small and mid-sized deals fell by 18% in 2024. Among middle-market advisors surveyed by Firmex, 38% saw below-average deal volumes in the second half of 2024, with trade uncertainties and geopolitical conflicts throwing up question marks.
To gain a firm footing amid ongoing challenges, predictability and risk aversion have become the order of the day. Private equity firms in particular have been forced to get creative, reassessing growth strategies and revisiting their portfolios in search of low-risk opportunities and secure places to deploy investment capital.
In this context, bolt-ons have emerged as a leading creative solution. By leveraging synergies, bolt-ons help firms expand their portfolios in ways that add stability and generate value. Because the existing management team is part of a bolt-on acquisition, it’s a stabilizing transaction with significant growth potential.
They’re also a way of raising value prior to divestiture, adding value to portfolio companies without taking on significant debt. Firmex data shows that most middle-market buying activity in Q4 2024 was by private equity and financial buyers. According to a KPMG survey, private equity buyers anticipate bolt-ons will comprise 36% of their deals in 2025. These numbers not only illustrate the staying power of creative deal strategies designed to add capability, but also show how impactful bolt-ons have been for boosting portfolio values.
The benefits of bolt-on acquisitions
Alongside the bolt-on advantages of increased stability, reduced risk and growth potential, bolt-on transactions are desirable for many other reasons. In contrast to transformative mergers, the deals are smaller and more cost-efficient, resulting in less financial risk. And by maintaining the underlying company structure and existing processes largely intact, disruptions are circumvented, minimizing operational risk.
Good candidate companies for bolt-ons are those that demonstrate potential but need support and synergies to scale or expand. The right bolt-on, therefore, fills gaps in the existing business, such as technology, capability, or product and service offerings.
For the platform company, it’s a much faster route to increased value than transformative deals. Taking on an existing business achieves growth faster than building a company anew or taking charge of a massive restructuring program. Keeping the bolted-on company’s people and processes in place lets the platform company accelerate the launch of new product lines or enter new markets more rapidly.
The quicker the synergy, the higher the profitability and operational efficiency. However, with every bolt-on transaction, strategy, preparation, and planning are key to a successful acquisition.
Pre-deal diligence for bolt-on acquisitions
Your first step is to commit to a bolt-on acquisition as a growth-generating strategy for the portfolio. Understanding the differences between the bolt-on, the tuck-in, and other creative deal types can help guide your selection and assessment process of portfolio candidates.
Next, conduct market research to analyze strategic fit and culture alignment, and closely examine the synergy between the existing company and the bolt-on candidate. Questions to guide you include:
- What experience can the companies provide each other?
- Does the bolt-on company need support to scale its operations?
- Will the bolt-on enable product or service distribution to new geographies?
- Will the bolt-on provide access to new audiences or customers?
- What industry connections exist and are worth exploring?
- Is there sufficient capital for investments needed (e.g. marketing, technology) to leverage the synergies?
Once the synergy assessment is complete and the Letter of Intent is signed with the bolt-on company, your team needs to get started early with comprehensive due diligence.
As with any transaction, you need to review the company’s balance sheets and liabilities to get a clear and accurate picture of its financial health. You’ll need to assess its legal compliance record and cross-check its reporting with regulatory requirements in related jurisdictions. Due diligence will take you through the company’s operational metrics as you review its processes, supply chain, vendor relationships, and workforce capabilities and needs. To assess the cultural fit with the platform organization, you’ll need to analyze employee performance and satisfaction metrics, as well as governance and other documentation related to leadership style.
Following due diligence, you’ll move on to the valuation process, build the deal structure, and then advance through the negotiation stage. With so many moving parts, organization, planning, and seamless document sharing throughout the due diligence and negotiation phases help stakeholders access the data they need, resulting in faster decisions and a shorter road to deal closure on your bolt-on acquisition.
Post-deal integration planning for bolt-on acquisitions
While the purchase agreement is an important milestone in a bolt-on acquisition, the post-deal period is pivotal for genuine success. Effective integration of the buying and targeted companies is necessary to ensure the synergies are realized to realize the bolt-on arrangement’s intended value.
Experienced bolt-on dealmakers develop their integration plans early, using resources that help them plan and execute effectively, such as a post-merger integration checklist. Dividing the process into distinct phases makes integration manageable. Setting timelines keeps it on track. Careful planning ensures oversight over every aspect of integration. It’s essential to assign people to supervise each part of the bolt-on integration, from culture and HR policy, to technology systems, cybersecurity, supply chains, vendor relationships, operations, and finance.
When bolt-on transactions fail, it’s usually due to inadequate due diligence or poor integration planning. Due diligence either fails to identify a key issue or misalignment, or the post-integration process is not given enough attention. In the worst-case scenario, a mismanaged bolt-on can hinder the performance of the parent company due to neglect or other complications arising from the bolt-on.
To avoid integration missteps, devote sufficient time and resources to your planning process to anticipate issues. Make sure you have sufficient resources to avoid integration delays and quickly address any inefficiencies or disruptions that can stall expected returns.
Leveraging a VDR to streamline the bolt-on acquisition process
The dealmaking process is often long, complex, document-heavy, and involves multiple stakeholders. Bolt-on acquisitions are no exception. The best way to lighten your load, collaborate effectively on diligence and integration, and fully control the process is by hosting all workflows and housing all necessary data and documentation in a virtual data room (VDR).
A VDR is a secure collaboration workspace for storing, sharing, and consulting all documentation related to your transaction. As the leading VDR for mid-market M&A, the Firmex VDR is specially designed to make due diligence and post-deal integration seamless, efficient, and effective for bolt-on transactions.
Our VDR designers recognize the importance of document sharing during pre-deal due diligence and post-deal integration. Before the deal, The Firmex VDR provides a strategic view of the portfolio to identify places to raise value. During and after the deal, the data room offers a collaborative and secure meeting place for clear and direct communication between stakeholders.
The following features make document and data sharing and review on Firmex VDRs seamless, efficient, and secure:
- Advanced permissions settings: Fine-tuned control over access to different types of documents and data for different users
- “View As” feature: With one click, view room contents from the perspective of any potential or current user to experience and verify what they see
- Usage monitoring: Track views and downloads of documents to gauge workflow, work completion, and stakeholder interest
- High performance: Maximum uptime, with >99.99% SLA
- 24/7/365 assistance: Full-time over-the-phone support from knowledgeable human beings for your internal team and your external stakeholders
- Customization: Use your branding and watermarks to ensure brand consistency and recognition among your stakeholders
- User-friendly UX: Intuitive and efficient tools, such as batch upload and automatic labeling, to simplify your work
- Bank-level security: Encryption at rest and in transit
- Flexible subscription plan: Plans engineered for long-term M&A transactions and multiple room needs, with no hidden overages
Pre-deal diligence and post-deal integration are integral to the success of every bolt-on acquisition. Hosting both processes in a Firmex VDR makes your job easier and more effective and demonstrates quality and reliability to everyone you’re negotiating with. To streamline the post-integration process, Firmex’s post-merger integration checklist can also be uploaded directly to the VDR, letting you manage and monitor the process from day one.
Over 223,000 companies trust Firmex with their transactions. We’re proud to lead the VDR industry with innovative features, robust security certifications, and pricing structures designed for M&A professionals and M&A dealmaking. To learn more about Firmex VDR features, book a demo.