Jay Jung, founder and principal of Embarc Advisors, explains the strategies.

What is happening on the M&A front among private equity firms?

The buy-and-build strategy continues to dominate in the middle market among private equity firms. By acquiring smaller add-ons (buy smaller companies to merge with existing portfolio companies) at lower multiples and later exiting the larger platform at higher valuations, these firms capitalize on the multiple arbitrage opportunity. In 2024, the market witnessed an uptick in PE-backed platforms being sold to larger PE players, adding further validation to this strategy. The visibility into exit valuations provided by such trades is likely to encourage further activity in the space.

Additionally, strategic corporate acquirers have become more active lately. As valuation levels moderated, larger corporations seeking to acquire products, technology and talent have been more successful in closing transaction