Amidst global economic uncertainty and geopolitical tensions, more companies are turning to smaller, financially safer deals to meet their strategic objectives through mergers and acquisitions (M&A).
In fact, add-on deals made up 44% of mid-market M&A activity in 2024, up from 35% in 2023, showing a clear shift toward lower-risk growth strategies.
One of the most common types of these deals is a bolt-on acquisition, where a larger company buys a smaller, complementary business. This article examines the process of bolt-on acquisitions, their significance, and the factors that make them a strategic move for companies seeking growth.
What is a bolt-on acquisition?
A bolt-on acquisition involves a larger firm buying a smaller company that fits well with its existing business. The goal is to strengthen what the larger company already does by adding new product lines, customers, or technologies, but without changing its existing structure.
It’s called a “bolt-on” because it’s like attaching a new part to a machine that already works, helping the business run better. Generally, bolt-on acquisition strategies are a proven method to grow without taking huge risks.
Explore the main strategic reasons for mergers and acquisitions and what results they help to achieve.
Bolt-on vs. tuck-in acquisition
Tuck-in and bolt-on acquisitions are often used interchangeably and for a reason — these types of deals are very similar since both involve a larger company buying a smaller one. However, they are different. This table compares tuck-in vs. bolt-on acquisition:
| Aspect | Bolt-on acquisition | Tuck-in acquisition |
|---|---|---|
| Size of acquired company | Often a bit larger or more established | Usually very small or early-stage |
| Integration level | May keep its own brand or operations separate | The acquiring company merges with the smaller target company |
| Goal | Expand services, enter new markets, grow faster | Add talent or clients, or fill a small gap efficiently |
| Example | A software company buys a smaller tool to offer more features | A big marketing agency buys a tiny local agency and merges it completely |
How bolt-on M&A are different from platform or transformational acquisitions
A bolt-on strategy helps companies benefit from growth while sticking to what they already know. It’s more focused, quicker, and easier to manage, especially for portfolio companies that want to achieve growth within a relatively short period.
- A platform acquisition helps a company enter a completely new market or build a new base for future deals. It often changes the company’s strategic objectives and business direction.
- A transformational acquisition brings large-scale change, like shifting into e-commerce or expanding globally, and may require rebuilding the company’s existing operations.
How bolt-on acquisitions work
The bolt-on acquisition strategy adds a smaller company that fits well with what the larger company already does, which makes the M&A process quicker and smoother compared to large deals.
Here’s how a typical bolt-on deal works:
The larger firm searches for a smaller company that offers similar product lines, serves the same customer base, or operates in nearby geographic markets.
Before the deal, the companies involved carefully examine finances, clients, intellectual property, legal contracts, and taxes to reduce risks.
Once everything checks out, both sides agree on a price and move forward. Since such acquisitions bolt onto the current structure, the deal process is quicker than larger mergers.
A solid merger and acquisition integration plan is key. Depending on the deal, the smaller company may keep some operational independence or fully join the existing business.
With a clear plan and shared goals, both sides work together to build trust, improve the customer experience, and realize synergies across systems and services.
Key benefits of bolt-on M&A
Here’s how bolt-on M&A creates value:
- Faster growth
Buying a smaller company can help a business grow quickly by gaining new customers, entering new markets, or offering more products.
- Lower cost
Bolt-on acquisition funding is typically less expensive than in larger mergers. They take less time and money to complete.
- Simpler management
Since bolt-on targets are smaller and already similar to the parent company, it’s easier to combine systems, teams, or tools.
- Stronger market position
Companies can expand their market share or reduce competition by buying smaller players in the same space.
- Newer talent or technology
Bolt-ons are also a great way to bring in new skills, ideas, or tech without building everything from scratch.
Is a bolt-on M&A right for your business?
Here’s how to decide if a bolt-on acquisition fits your business goals.
When bolt-ons make sense:
- Your company has a clear business model and steady operations.
- You want to expand within the same market or offer more to your current customers.
- You have the resources to support small acquisitions without hurting your core business.
- You’re looking for quick wins — like new customers, products, or talent.
When bolt-ons may not help:
- You need a major change or are entering a brand-new industry (a platform or transformational deal may be better).
- Your team can’t handle extra work from even a small acquisition.
- The smaller company doesn’t fit well with your brand, culture, or systems.
What private equity firms look for in bolt-on targets
Private equity firms often use bolt-on acquisitions to help their portfolio companies grow faster, improve performance, and reach more customers. To make the most of this method, they typically look for bolt-on targets that bring true value and are easier to add to the existing business.
Here are the key traits of a good bolt-on acquisition candidate:
- Strategic fit
The target company should match the larger firm’s products, services, or customers. A strong fit means simpler integration and quicker potential results.
- Stability and growth potential
Private equity firms prefer businesses with a steady income, a reliable customer base, and good potential to grow more under the new ownership.
- Unique value
A good target brings something new, such as special intellectual property, strong talent, or a presence in new geographic markets, that supports the buyer’s strategic objectives.
- Easy integration potential
The ideal company fits well with the buyer’s existing operations. This makes the integration process smoother and avoids significant changes.
- Low risk
Private equity firms want targets with low debt, no serious legal issues, and no major integration challenges. The fewer surprises, the better.
- Room to scale
A strong bolt-on target should have room to grow, whether through expanded product lines, additional locations, or reaching new customer segments.
With the right target and careful planning, a bolt-on acquisition creates true strategic value and a lasting competitive advantage.
Real-world examples of bolt-on M&A
Now, let’s take a look at the three real-life examples of bolt-on acquisitions to better understand how they work.
1. Procter & Gamble’s acquisition of Native (2017)
In 2017, consumer goods giant Procter & Gamble (P&G) acquired Native, a small but fast-growing natural deodorant brand. Native had built a loyal customer base and strong online presence by offering clean, simple products.
The deal helped P&G expand its product portfolio in the personal care space without changing its core business. It was a classic bolt-on strategy — adding value by entering a growing niche market. Native continued to operate with some independence while gaining access to P&G’s resources and retail reach.
2. Salesforce’s acquisition of Vlocity (2020)
In 2020, Salesforce, a global leader in cloud CRM software, acquired Vlocity, a company that built industry-specific applications on the Salesforce platform.
The goal was to strengthen Salesforce’s existing operations by offering more targeted tools for sectors like healthcare, telecom, and insurance. Since Vlocity’s products were built on Salesforce technology, the integration process was smooth and efficient.
This bolt-on acquisition helped Salesforce realize synergies and provide more value to its industry clients. It also supported their strategic objectives of deepening vertical solutions.
Learn what synergy is in mergers and acquisitions, why it’s important, and how to calculate it.
3. Microsoft’s acquisition of RiskIQ (2021)
In 2021, Microsoft acquired RiskIQ, a cybersecurity company focused on threat intelligence and monitoring.
The goal was to add advanced security capabilities to Microsoft’s cloud services, especially Azure. This bolt-on acquisition directly supported Microsoft’s existing business by improving protection for enterprise customers without disrupting its overall structure. Microsoft integrated RiskIQ’s tools into its offerings to enhance visibility into cyber threats across cloud and hybrid environments.
The deal helped Microsoft strengthen its competitive advantage in the fast-growing cybersecurity market.
Risks and challenges of bolt-on deals
While bolt-on acquisition strategies help companies quickly expand, they also come with risks. Here are the risks and operational challenges deal-makers can face:
- Integration challenges
Combining two companies, even small ones, is challenging. Differences in systems, processes, or company culture slow down the integration process or cause confusion. Without a clear integration planning strategy, the deal can lose value.
- Hidden costs or problems
Sometimes, the acquired company may have financial issues, legal risks, or weak customer relationships that weren’t identified during the deal, especially if there was inadequate due diligence. These hidden problems impact the acquiring entity’s performance and slow down growth.
- Loss of key people or customers
After the deal, critical employees or loyal customers might leave if they don’t like the changes. This hurts the smaller company’s value and reduces customer loyalty for the combined business.
- Overestimating value
Companies involved may expect big gains too quickly. Needless to say, bolt-ons aren’t magic. They still take time and effort, and rushing them creates more problems than progress.
- Complex management
When the acquired company keeps some independence, managing both businesses can become tricky. Different teams may follow different priorities, making it difficult to stay aligned on strategy and goals. This setup also leads to confusion over who controls what, which slows down decision-making and creates tension around how resources are used.
Key takeaways
- A bolt-on acquisition happens when a larger company acquires a smaller, complementary business to strengthen its existing operations without changing its core structure.
- Unlike tuck-in acquisitions, bolt-ons may allow the acquired company to keep some independence, making the integration process more flexible.
- The bolt-on deal process includes finding a good fit, doing research, agreeing on terms, creating an integration plan, and working together to realize synergies.
- Benefits of bolt-on M&A include quicker growth, lower costs, simpler integration, stronger market position, and better access to new talent or technology.
- A bolt-on strategy works best for stable companies that want to grow within the same market, expand their customer base, or improve services without major changes.
- Private equity firms often use bolt-ons to help portfolio companies scale. They look for targets that fit well, have growth potential, and are easy to integrate.
