The rise of private equity platforms has transformed the industry over the past decade. Platform investments allow private equity firms to consolidate fragmented sectors and create value through scale, operational improvements, and professional management. This article analyzes how leading private equity firms like KKR, Blackstone, and Carlyle have deployed the platform model across consumer, healthcare, and industrial sectors. We will examine the benefits of platform consolidation, review case studies, and highlight best practices for private equity firms undertaking platform builds.
Platforms enable private equity firms to consolidate fragmented sectors
The private equity platform investment model involves buying multiple companies within a sector and combining them into a single operating platform. Platform consolidation provides several advantages for private equity firms and their portfolio companies. By aggregating smaller companies, platforms can achieve economies of scale in purchasing, manufacturing, and overhead costs. Operational expertise and best practices can be rapidly disseminated across the platform companies. Consolidation also provides opportunities for cross-selling and geographic expansion that would not be feasible for standalone companies. Additionally, the platform has increased bargaining power with customers and suppliers compared to individual businesses. Private equity firms highlight their capabilities to professionalize management, improve operations, and support add-on acquisitions as key value-added services to companies joining a platform.
Leading private equity firms have deployed platforms across diverse sectors
Many top-tier private equity firms like KKR, Blackstone, and Carlyle have been active platform builders across consumer, industrial, healthcare, and technology sectors. Notable platforms include KKR’s Air Medical Group in emergency air transportation, Blackstone’s Alight Solutions in HR and payroll services, and Carlyle’s OrthoClinical Diagnostics in medical diagnostics testing. The platform model has been particularly popular in healthcare as private equity firms consolidate physician practice groups, dental service organizations, veterinary clinics, and other provider segments. Private equity-backed platforms are also prevalent in consumer and retail sectors, with examples like Carlyle’s Vogue International beauty company platform and KKR/Coty’s Wella professional haircare platform. As technology enables new platform business models, private equity will continue sponsoring consolidation plays across additional fragmented sectors.
Case studies highlight how platforms create value for investors
Blackstone’s acquisition of Centerplate, a sports stadium catering business, exemplifies platform value creation in the consumer sector. By consolidating venue food service providers across North America and Europe, Centerplate expanded from serving 50 venues in 2010 to over 300 by 2020. The platform strategy allowed Centerplate to innovate new food concepts and leverage scale for cost efficiencies. Under Blackstone’s ownership, Centerplate’s EBITDA grew from $40 million to over $200 million in five years. Another example is KKR’s creation of Optiv Security through acquiring and integrating cybersecurity services providers. Optiv’s platform gave clients access to broader solutions and achieved $300 million in synergies. These case studies demonstrate how aggregating sector-specific companies allows private equity sponsors to accelerate growth and multiply equity value.
Best practices for successful implementation of private equity platforms
While platforms offer advantages, private equity firms need the right blueprint to execute them successfully. It is critical to have an experienced operating partner and dedicated integration team. The optimal sector should be fragmented but have a viable path to consolidation. Firms must balance adding scale while maintaining specialization. Effective integration and synergy realization across platform companies is vital to success. Leading platforms invest heavily in IT infrastructure, ERP systems, and data analytics to disseminate best practices. Developing professional management and clear incentives is key to driving performance. Providing operational support but allowing companies autonomy is also important. Following these best practices allows private equity firms to maximize value from platform builds and deliver superior returns to investors.
The private equity platform investment model has emerged as a proven strategy to consolidate fragmented sectors and generate outsized returns. Leading PE firms have successfully deployed platforms across diverse industries by leveraging scale, operational improvements, and professionalization. When executed well, platforms can accelerate growth and value creation for sponsors and portfolio companies alike.