The difference between buying companies and building a business

In private equity today, value creation increasingly depends less on entry and exit conditions and more on execution, particularly in buy-and-build strategies, where outcomes are shaped by how effectively businesses are integrated and grown over time.

This shift has increased a focus on industries such as wealth management, insurance distribution, and advisory services - spaces where markets remain highly fragmented, and client expectations are evolving. Many of these sectors are made up of smaller, independent firms with strong client relationships but limited resources to invest in technology, operations, and the broader capabilities clients increasingly expect.

The fragmentation across these sectors creates opportunities to bring smaller individual firms together to build more durable businesses with stronger infrastructure and additional client offerings.

The “buy-and-build” investment strategy is one way our team supports the growth of durable businesses. While the logic behind the strategy is straightforward, execution rarely is. In our experience, success depends less on the number of acquisitions made and more on how the business evolves as companies are brought together, and whether growth can be sustained over the long term.

Building an integrated platform

In buy-and-build strategies, there is a meaningful difference between aggregation and integration. Aggregation increases size, but integration is what drives value. Without it, a platform remains a collection of separate businesses; over time, effective integration allows each acquisition to strengthen the overall company. In practice, that means aligning systems, standardizing processes, and operating as a single, cohesive business.

A successful strategy begins with a solid platform. We typically look for businesses with strong leadership, a clear value proposition, and the desire to scale. These are often companies that are already performing well in their markets and can serve as a foundation for growth. From there, acquisitions are used to grow the business by adding services, expanding geographically, or deepening client relationships.

In fragmented sectors, we find that businesses often operate with different systems, processes, and client service approaches. Bringing them together requires a structured and consistent approach. This often means moving firms onto common technology systems, standardizing reporting and compliance processes, and centralizing functions such as finance and operations, while maintaining the client relationships and local connections that made the businesses successful.

This is only part of the work. In people-based businesses, integration also depends on how the organization operates day to day, including developing a consistent culture and a shared approach to serving clients. That can include referring clients across offices, sharing knowledge, or offering services and expertise that would have been difficult for smaller firms to develop on their own, allowing scale to translate into value.

Alignment and organic growth matter

Buy-and-build strategies also depend heavily on alignment and the ability to sustain growth beyond acquisitions.

How we approach acquisitions is central to making the strategy work. We have found that focusing on businesses that are still growing and looking to expand what they can offer clients, rather than those simply seeking an exit, tends to produce stronger outcomes over time.

This distinction matters. When firms are effectively “buying in” to a broader platform, both economically and operationally, they are more likely to remain engaged in building the business over time. That alignment helps reinforce culture, sustain growth, and preserve the client relationships that underpin the business.

Acquisitions can accelerate growth, but the underlying businesses need to stand on their own. That means continuing to grow through new client relationships, expanded investment options, and deeper engagement. This is particularly important in people-driven industries like financial services, where relationships and retention are critical. Growth depends on retaining advisors and maintaining the trust they have built with clients.

Why the strategy works in financial services

We believe financial services is particularly well-suited to the buy-and-build approach because many parts of the industry remain highly fragmented. In areas such as wealth management, insurance distribution, and retirement advisory, there are thousands of independent firms, often built around strong client relationships and deep local connections. These businesses are often successful in their own right, but many operate with limited infrastructure and a narrower set of capabilities than clients expect.

At the same time, client expectations are changing. A significant amount of wealth is being transferred across generations, and clients are looking for more than just investment advice. They want support across estate planning, tax, and retirement, along with a more seamless digital experience. Meeting those expectations requires ongoing investment, which can be challenging for smaller firms to fund on their own.

A more integrated firm can strengthen operations, and expand client offerings, helping build the foundation required to compete in a more complex and evolving market.

A strategy in practice: CAPTRUST

CAPTRUST provides a useful example of how buy-and-build strategies can evolve beyond acquisition-led growth.

CAPTRUST is a national investment advisory firm providing wealth management, retirement, and institutional advisory services to individuals, companies, and institutions. The company has expanded through acquisitions and partnerships with advisory firms while investing in shared infrastructure, broader client offerings, and centralized support functions.

What stood out to us when we first evaluated the company was how deliberate the business has been in its approach to growth. CAPTRUST focuses on partnering with management teams and owners that want to continue building their businesses. These are often founders who have reached a point where they are spending more time running the business than serving clients, or who want to expand their set of offerings, such as tax expertise or alternative investments, but lack the resources to do so on their own.

CAPTRUST’s growth is not dependent solely on acquisitions. It also depends on how the organization operates on a daily basis. As the organization has grown, advisors have been able to collaborate more broadly across offices and specialties, enabling them to offer a wider range of solutions for clients without changing the relationship-driven nature of the business. This creates opportunities to collaborate, whether through referrals between offices, sharing insights across client situations, or offering new resources. This shifts the model from a collection of independent firms to a more connected organization, creating a single culture and client-facing model.

Fragmentation and continued opportunities

As these industries evolve, bringing firms together is only the starting point. The real work is building a business that can support professionals day to day and take on the parts of the job that don’t scale well, while giving them the tools and resources to better serve their clients.

In our experience, the difference lies not in the strategy itself, but in the ability to execute. Building a business that works as one, both operationally and for the people serving clients, is harder, and that is where the difference lies.