How big should each acquisition be relative to the holdco?

How big are the acquisitions of the large serial acquirers?

Small next to the group. The figures below come from company reports, and the averages are my arithmetic:

• Lifco, 2025: 16 businesses with about SEK 2.2bn of annual net sales and around 460 employees, against group net sales of SEK 28,251M. SEK 2,200M / 16 = about SEK 138M of sales per deal, or 0.5% of group sales ( Lifco Annual Report 2025).
• Addtech, year to 31 March 2026: nine acquisitions with combined annual sales of about SEK 1,595M, against group net sales of SEK 22,703M. SEK 1,595M / 9 = about SEK 177M, or 0.8% ( year-end report).
• Judges Scientific, 2024: Magsputter cost £12.3M and had adjusted EBIT of £1.74M for the year to January 2024 ( announcement). Group adjusted operating profit for 2024 was £27.9M ( FY2025 results). £1.74M / £27.9M = 6.2%.
• Constellation, 2016: 40 acquisitions, 35 of them with fewer than 100 employees and 30 bought from owner-managers. The company wanted to move from 40 a year toward 100 ( 2016 President's Letter).

These are averages, so single deals may be larger or smaller. They show that none of these groups is betting itself on one purchase.

What happens when the deal is large?

Constellation is the one that writes about it. Its 2015 letter says it uses a lower hurdle rate for larger transactions ( 2015 letter). Its 2016 letter says a very large acquisition needs to be led by a single, highly experienced acquirer, and that larger recent acquisitions earned lower returns ( 2016 letter).

The 2021 letter puts numbers on the large end. Large vertical-market software businesses require multi-hundred-million-dollar equity cheques. Constellation had invested less than 10% of its free cash flow available to shareholders in them and had made three such acquisitions in 26 years ( 2021 letter). The company keeps most of its capital in small and mid-sized deals.

Why should each deal be small relative to the holdco?

• Survival. One bad deal should not break a loan covenant or force a dividend cut.
• Learning. Many small deals produce many data points. A single large deal produces one.
• Integration. A deal that doubles the group needs a new management layer, not an add-on process.
• Price. Larger targets are usually sold in wider auctions. Constellation's 2021 letter says that over five years brokers invited it to only 16% of the sale processes for large software businesses.

My view is that a first public acquisition at a small holding company is the exception, because the first deal is most of the group. After that, set a ceiling on how much of group earnings any single target may add. Rule of thumb and my opinion, not a disclosed policy: set a ceiling in the range of 10% to 25% of group earnings per deal and review it as the group grows.

What does deal size do to debt? A worked example

Assumptions. A holding company has EBITDA of $3.0M and net debt of $4.5M, or 1.5x. Its loan covenant caps net debt at 3.0x EBITDA, the same gearing limit Judges discloses for its bank facility. A target costs 6x EBITDA, is paid with new debt, and its profit then falls by 40% in the first year.

• Deal A, $0.3M of target EBITDA: price $1.8M. Net debt $6.3M, EBITDA $3.3M, 1.9x. After a 40% fall in the target, EBITDA is $3.18M and net debt to EBITDA is 6.3 / 3.18 = 2.0x. Covenant intact.
• Deal B, $1.5M of target EBITDA: price $9.0M. Net debt $13.5M, EBITDA $4.5M, exactly 3.0x on day one. After a 40% fall in the target, EBITDA is $3.9M and net debt to EBITDA is 13.5 / 3.9 = 3.46x. Covenant breached.

Deal A added 10% to group EBITDA. Deal B added 50%. The same error cost nothing in one case and a default in the other. The numbers are illustrative; your lender sets the real covenant. See how much debt is safe.

Where these numbers come from: Lifco is from its Annual and Sustainability Report 2025. Addtech is from its year-end report 2025/26. Judges is from its Magsputter announcement and FY2025 results. Constellation is from its president's letters for 2015, 2016 and 2021. The percentages and the debt example are the site's arithmetic on stated assumptions.

Related questions

Is there a standard maximum deal size as a share of the company?

No. I found no disclosed limit at the companies above. The 10% to 25% range in this article is my rule of thumb, not a standard.

Can a small holdco buy something larger than itself?

Yes, in private markets through seller notes and rollover equity, but the risk rises with the ratio. See funding acquisitions without more SBA debt.

Does buying many small companies cost more to run?

It can. Many small deals need a repeatable process for diligence and integration. That fixed cost is part of why serial acquirers build central teams.

What comes next

Deal size and debt limit each other, so look at the debt side next: How much debt is safe for a public serial acquirer.

Related articles

• How much debt is safe for a public serial acquirer?
• What hurdle rate should a serial acquirer use?
• Lifco: a controlled, decentralized compounder
• Addtech: born from a spin-off
• How do you run a roll-up as a small business owner?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.