Platform company

Definition

The first business a consolidator buys, the base its add-ons join.

Why It Matters

It explains the two-speed market a searcher competes in. A platform buyer pays up for the anchor, then buys smaller add-ons at lower multiples, so the business you are bidding on can be worth more to a consolidator building around it than to a standalone buyer.

In numbers: A consolidator pays 6x for a $3M EBITDA platform and 4x for a $500,000 add-on, so $18M and $2M. The combined $3.5M of EBITDA is worth $21M at the platform's multiple.