By IDEASCANNER · 2026-10-04 · Category: Value Creation
Many German mid-sized companies are strong technologically but too small individually for international investors. Value-and-Build shows how several firms can form a strategically stronger, scalable and investable group.
An approach connecting consolidation, strategic corporate development and systematic value creation
Germany’s Mittelstand has a distinctive structure: the vast majority of companies are small or mid-sized. According to the Federal Statistical Office, about 3.2 million companies qualify as SMEs. They employ more than half of the workforce in the sectors considered but generate only around 27 percent of revenue. Destatis
This fragmented structure is simultaneously a strength of the German economy. It enables specialization, entrepreneurship, technological niche leadership and close customer relationships. At the same time, it can be a disadvantage when larger international investors look for platform companies of a certain scale, management structure and growth outlook.
International capital remains fundamentally interested in German companies. PwC recorded around 1,233 M&A transactions by foreign investors in Germany for 2025. Industrial manufacturing accounted for the largest sector at 29 percent. Private equity investors were involved in more than half of these transactions for the first time. US investors were among the most active. PwC
This raises an interesting strategic question: Could several mid-sized companies together reach a scale and quality that makes them far more attractive to international capital?
The structural gap between the Mittelstand and international capital
The starting situation can be described as a structural matching problem.
On one side are many specialized companies with technological know-how, established customer relationships and often decades of market presence. On the other side is international capital looking for companies with growth potential but, because of transaction costs, governance requirements and investment volume, cannot or does not want to acquire every smaller company individually.
Interest in Germany remains significant. In PwC’s Private Equity Trend Report 2026, 66 percent of surveyed private equity investors said they already hold investments in Germany. Of those, 97 percent planned further investments within the next five years; 56 percent intended to increase their exposure. PwC
Consolidation can bring these two sides closer together.
The crucial question is how it is organised.
An alternative to classic buy-and-build Classic buy-and-build strategies typically start with the acquisition of a platform company, which then acquires further companies and integrates them into the existing group. For owner-managed Mittelstand companies, another sequence is conceivable. Several fundamentally compatible companies could first develop a common strategic perspective. Complementarities, market potential, the future roles of the owners and the basic economic framework would be examined and agreed.
This would initially create a virtual corporate group: not yet a completed legal consolidation, but a defined industrial and strategic concept.
On that basis, an appropriate holding structure and an investor participation could then be developed. The difference is significant: an investor would not be presented with a set of potential individual transactions, but with a pre-conceived platform and a traceable development and value-creation plan.
Consolidation alone does not create value
A merger of companies is not itself a value-creation strategy. Four companies with €25 million in revenue each mathematically produce a group with €100 million in revenue. That does not automatically mean the group will be valued higher than the sum of the individual companies.
Private equity practice demonstrates this challenge. According to McKinsey, add-on acquisitions already made up about 70 percent of PE transactions in 2023. At the same time, McKinsey emphasises that successful add-on strategies require a clear focus on a few essential value drivers, systematic integration and consistent measurement of actual value creation. McKinsey & Company
That is why an extension of the classic buy-and-build logic seems sensible.
We use the working term Value-and-Build for this.
What matters is not the number of acquired companies but the ability to develop them into a strategically and operationally stronger company.
We see three value-creation fields as particularly relevant.
1. A shared strategic differentiation
The new group should not merely be larger. It should have capabilities that no single member company could offer on its own.
The key question is therefore not which similarities the companies have, but what additional customer benefit and new market position their combination enables.
Complementary technologies can lead to a broader solution portfolio. Different manufacturing capabilities can be combined. Companies can use each other’s customer access or jointly take on larger orders that a single provider could not fulfil.
From several specialised mid-sized firms, a group with an independent strategic position can emerge.
2. Scale growth through multipliers
A second value lever is sales.
Many mid-sized companies have excellent products but grow mainly in proportion to their own sales organisation. Additional revenue requires more salespeople, locations and resources.
A larger group can build a different sales architecture.
Strategic sales partners, international distributors, OEM relationships, industry platforms and other multipliers can be deployed for several companies and products at once.
This creates a network that future group members can also benefit from. Growth is then not generated solely by adding in-house resources but via a progressively scalable sales infrastructure.
3. Operational excellence through AI, automation and robotics
The third lever concerns productivity.
Here, artificial intelligence is currently changing the possibilities for buy-and-build groups fundamentally. Processes in production, procurement, planning, quality assurance, administration, sales and knowledge management can increasingly be automated or optimised with AI support.
A corporate group has a distinct advantage over a single smaller company: investments in technology, data infrastructure and process development can be spread across multiple entities. A successful solution does not have to be developed four times.
It can be developed once, measured and then rolled out within the group.
Private equity investors are responding to this trend. McKinsey describes a clear shift from financing- and multiple-driven returns toward operational value creation. Since 2021, PE firms have on average more than doubled their operating teams; AI is increasingly viewed as a group-wide lever of value creation. McKinsey & Company This can turn a consolidation strategy into a self-improving corporate group over time.
From the M&A transaction to a value-creation architecture
This perspective also changes roles within such a project. Classic M&A expertise remains indispensable. Companies must be sourced, valued, financed and legally combined.
However, the transaction is not the ultimate goal.
The crucial economic work is to make the new group more effective afterwards.
This is where we see IDEASCANNER’s role. Our methodology evaluates companies across more than 150 value-enhancing attributes and translates identified potentials into concrete development measures. Within a corporate group, this logic can go further: value drivers are analysed not just for individual entities but for the whole system.
This produces a value-creation architecture that should answer, even before a transaction: What strategic position should the group attain? Which additional growth levers arise from the combination? What productivity improvements are realistic? Which investments are required? And by which KPIs can one prove that additional corporate value is actually being generated?
Value-and-Build as a possible new perspective
Value-and-Build is not yet an established M&A category nor an empirically proven model. It is initially a strategic hypothesis.
The underlying trends, however, are real: Germany’s corporate landscape is highly fragmented, international capital still seeks attractive German investments, buy-and-build has become a central private equity tool, and the return logic is shifting toward operational value creation.
This could create an interesting new perspective for the Mittelstand.
Companies would no longer necessarily have to wait to reach the scale required by an international investor on their own. Several complementary firms could jointly form a platform and systematically develop it before and after a capital transaction.
Success would then not be measured by the number of acquisitions.
Success would be measured by the additional corporate value created.
Buy-and-Build would thus increasingly become Value-and-Build.
Sources - Federal Statistical Office: SME structure in Germany – 3.2 million SMEs, employment and value added. Destatis – Small and medium-sized enterprises - PwC: Destination Germany 2025 – foreign M&A activity, private equity and industrial manufacturing. PwC – Destination Germany 2025 - PwC: Private Equity Trend Report 2026 – investment intentions and PE engagement in Germany. PwC – Private Equity Trend Report 2026 - McKinsey: How private equity funds can use M&A to create outsize returns – the importance of add-ons and systematic value creation. McKinsey – Add-on M&A and Value Creation