The "buy-and-build" strategy has become the dominant model in private equity, especially in the middle market. Add-ons make up a staggering 75% of deal count, though only 40% of value. This shows a fundamental shift towards using smaller, bolt-on acquisitions as the primary method for deploying capital.

The best consolidation returns come from identifying a fragmented industry before it becomes a popular PE theme. Entering in the "first inning" avoids competing with dozens of other platforms, which inevitably drives up acquisition multiples for both platforms and add-ons, eroding returns.

Distributors are leveraging their central position to acquire assets typically targeted by corporate or health system buyers, such as physician services. This strategic shift transforms them from supply chain "middlemen" into integrated ecosystem players, increasing competition for deals.

The company is shifting its private equity strategy from acquiring any company it can grow to focusing on businesses that directly benefit its large distribution base of other business owners. This creates a powerful synergistic flywheel where portfolio companies gain instant customers.

Public markets, focused on growth, may assign low multiples to Driven's stable but non-growing franchise brands like Meineke. However, their capital-light nature and predictable cash flows are highly attractive to private equity buyers, who would likely pay a significantly higher multiple than the public market implies.

The best investment opportunities aren't always in glamorous, crowded sectors like tech or healthcare. True competitive advantage comes from identifying and mastering industries with "short lines"—areas with less capital and fewer specialists, such as Main Street franchise businesses.

Private equity is increasingly buying and rolling up small, local businesses like dentists and landscapers, rather than acquiring and improving larger companies. Buchwald cautions that this shift means the asset class's future returns may differ significantly from the historical performance that investors have come to expect.

The strategy involves acquiring multiple small, local businesses (e.g., laundromats) and applying principles like operational efficiency and economies of scale, mirroring the playbook of large private equity firms but at an accessible level for individual entrepreneurs.

Venture capitalists often have portfolio companies that are profitable and growing but will never achieve the breakout public offering VCs need. These companies can become a distraction for the VC and can be acquired by PE investors who see them as attractive, stable assets.