By Opus Connect
In the second quarter of 2025, add-on acquisitions made up 75.9% of all U.S. private equity (PE) buyout activity, above the five-year average of roughly 72.5% and within a hair of the all-time high. For full-year 2024 the share was about 76%. Three of every four PE buyouts is now a bolt-on onto an existing platform, not a fresh platform purchase.
For an M&A advisor or investment banker (IB), the reflex is to read that as a tailwind: more buyers, more transactions, more mandates. It isn’t. A growing share of those add-ons never touch a process, experts say. As one law-firm analysis of the trend notes, add-ons are “more often sourced through organic connections” like the platform’s own network, its CEO’s rolodex, and its sponsor’s outbound origination team.
That is the squeeze. In the lower middle market (LMM), the volume of deals is real and rising. The volume of intermediated deals is not. Buy-and-build has eaten the LMM, and it has been quietly eating the advisor’s mandate along with it.
Most advisors are still selling the one product a platform sponsor specifically does not want on an add-on. It’s a competitive auction that kills the deal’s economics.
The math that makes the auction the enemy
The whole point of an add-on is multiple arbitrage. A platform bought at, say, 10x EBITDA tucks in a smaller company at one to two turns lower, then re-rates the combined entity at the platform multiple on exit. The spread between the entry and exit multiple is the value-creation engine. Anything that lifts the entry price (most obviously a competitive process with five other bidders) eats directly into the return.
So a sponsor running an add-on strategy has every incentive to keep the deal off-market. Bolt-ons also close faster than platform deals because the strategic logic is already in place, and the platform’s own management frequently knows the target personally. Add a 2–4% sell-side fee on a small acquisition and, from the sponsor’s seat, the advisor isn’t a value-add: they are a cost that compresses the arbitrage and a process that raises the price. That is the line item getting cut.
The Conversion Premium: sell what the platform can’t build in-house
Here’s the reframe. Platforms are extraordinarily good at finding companies — between proprietary data tools, sector mapping, and portfolio-company relationships, comprehensive target lists are now cheap and commoditized. What platforms cannot manufacture internally on demand is conversion: turning a not-for-sale owner into a willing, pre-conditioned seller who closes at a proprietary price.
Call it the Conversion Premium. The scarce input in a buy-and-build market is not the list — it’s the trusted relationship that moves an owner from “not interested” to a signed letter of intent (LOI) without an auction ever forming. An advisor who owns that relationship is not competing with the sponsor’s data stack. They are supplying the one thing the data stack can’t produce.
Four moves to become origination, not overhead
- Pick three to five platforms and embed. Stop chasing scattered one-off sell-side mandates across the map. Identify the active buy-and-build platforms in one or two sectors you genuinely know, and make yourself their de facto outsourced origination in that niche. Recurring add-on flow from a handful of platforms beats a pipeline of one-time listings.
- Sell off-market access, not process. Lead every platform conversation with the proprietary relationship you bring — an owner they could not reach, pre-conditioned and priced before any competitive process forms. Never open with “we’ll run a tight auction.” On an add-on, that is a threat to the economics, not a service.
- Price to the arbitrage, not the deal size. A standard percentage fee on a small bolt-on reads as pure cost. Restructure it: a modest retainer plus a success fee framed against the multiple spread you protect by keeping the deal quiet, or a flat per-deal originator fee. Make your economics legible from the sponsor’s side of the table.
- Become the sector’s standing intelligence. Map ownership, succession timelines, and competitive dynamics in your niche continuously, and feed that intelligence to your platforms before targets surface anywhere else. The advisor who arrives with next year’s targets — not this quarter’s teaser — is the one who never gets cut.
Why this matters for LMM advisors
This isn’t only a sell-side banker’s problem. Buy-side advisors, sell-side IBs, and even service providers — quality-of-earnings (QofE) shops, deal counsel, lenders — all face the same re-routing. When a single platform completes multiple add-ons over its hold, the relationship that wins you a seat on the first one tends to recur across all of them. The economics flip from chasing one-off transactions to compounding a single platform relationship. The advisors who lock into a sponsor’s add-on engine early stop bidding for mandates and start receiving them.
The 75% figure isn’t a wave of mandates heading your way. It’s a map of where the mandates already went, and you win them back by selling the introduction, not the auction.
Opus Connect helps independent sponsors, M&A advisors, and capital providers build more intentional business development practices. Learn more about our BD Masterclass workshops.
