By Tim Ringel
Private equity has become very comfortable with the term “platform.” Buy a solid business, add three or four adjacent ones, and suddenly the offer is cross-selling, shared services, broader capabilities and higher exit multiples.
But assembling the pieces is just the beginning. Turning them into a platform requires hiring the right people to run them, people who know how the businesses, their people and their customers can create more value together.
In other words, adjacency does not make a platform. Skilled operators do.
I’ve seen this from both sides, having built global businesses both through acquisitions and early investment in more than 50 pre-IPO companies, among them SpaceX, OpenAI and Anthropic. I’ve learned through those experiences that companies that create extraordinary value don’t become platforms because somebody says they are platforms in a sales deck. Rather, they earn that distinction when operators who understand the business can create an advantage that gets stronger as the business grows.
Skilled operators understand that a real platform has a compounding mechanism, meaning its technology makes every new product better, its distribution makes every acquisition more valuable, and its data enhances the experience for every customer. Without that mechanism, investors may simply be paying a platform premium for a collection of companies with an owner in common.
The distinction matters because the financial model can make integration look much simpler than it actually is. You can move revenue from one column to another on a spreadsheet and call it cross-selling. Customers are less cooperative. They buy from people they trust, usually for a very specific reason. They do not automatically want another service just because two suppliers happen to report to the same holding company.
So the first question a prospective buyer should ask is fairly simple: What can these businesses do together that none of them can do independently—and who is going to run them?
If the answer is vague, then the platform probably is too.
The next set of questions is equally logical: Does the operating model support the claim? Who owns the shared customer? How will incentives reward collaboration instead of protecting individual P&Ls? Which technology and data can be combined? What functions should remain independent? How long will integration take before it produces actual value?
Those questions are even more important when one considers that most businesses are people driven. Your assets walk out the door every night. They created the value that’s being acquired in the first place. If you force them into a marriage too quickly, the very qualities that justified the acquisition can vanish.
I’m not talking about keeping the companies you’ve acquired completely independent. But integration requires design. Functions like finance, technology and data may be ripe to be combined, while client teams could benefit from having their own specialized expertise. The thing is, integration should only solve a real problem, not exist solely to make an org chart look more impressive.
Then there’s the issue of hiring the right team to run the businesses you want to make a platform. In my view, PE firms need to pay more attention to this. While companies are bought to generate returns for investors, the operator of a business that’s purely financially oriented can lose sight of the interconnectivity of a real platform.
Building and scaling a business means understanding the financial background as much as it means understanding the industry, the people and the needs of the client. It’s not something that can be managed by a spreadsheet. Rather, it’s something an operator learns over years by running businesses in the sector on which PE is focused on building a platform.
Value is created as much by passion for the business as putting in capital at the right moment.
Tim Ringel is Founder and Global CEO of next-generation international advertising group Meet The People. A builder of multiple international agency groups, Tim is a seasoned global CEO and executive in the marketing space, having run world-renowned Spring Studios and Reprise Digital, IPG Mediabrands’ digital global agency network.
