InSight

Exit and Growth Strategies for Middle Market Businesses

Keys to a Successful Acquisition Search

By Brian Ytterberg | Jul 13, 2016

successful acquisition searchesA successful acquisition search can be a long and arduous process.  Many buyers become frustrated as they encounter a number of starts, stops and dead-ends along the way.  Many eventually give up as they do not find a suitable target in a reasonable amount of time, or worse, they miss out as their competitors acquire one of their potential targets.

We have noticed a few keys that to successful middle market acquisition searches which include the following:

  • Review your strategic plan.  Where do you want to be in three or five years?  How can an acquisition help you realize your long-term goals?
  • Know your capabilities, strengths and weaknesses. What size acquisition can you handle?  What amount of leverage can you sustain?  Do you have the management team and depth to pursue an acquisition?
  • Bring focus to your acquisition search.  Develop a list of criteria and stick to it.  Acquisition criteria can include factors such as size, geography, product lines, manufacturing capabilities, distribution channels, management team, level of synergies, amount of capital expenditures, and many others.
  • Distinguish yourself from other buyers.  Business owners receive many unsolicited calls from potential acquirers, investment bankers and business brokers.  Why should they listen to your inquiry?  Work on developing your story and what differentiates you from other potential buyers.
  • Reality Check.  Can you be a competitive buyer and are you willing to pay a market price?  While every buyer is looking for that undiscovered gem, the reality is that in today’s market there is almost always competition, and buying at a price below market is usually not realistic.
  • Network within your industry and get the word out that you are seeking acquisition targets.  Attend trade shows and industry conferences, and be involved in industry trade organizations.  This will help to raise your profile within the industry and to develop relationships with potential targets.
  • Pursue multiple targets.  Many buyers pursue targets sequentially.  Successful buyers will pursue multiple targets at once knowing that deals take time and can often become derailed.
  • Seek good advice.  Work with an advisor who can assist with the search but who can also advise you in completing the deal once a target is identified.  Many acquisition search consultants are effective at identifying targets but lack experience in negotiating, structuring and closing transactions.

Finally, it is a long-term process.  While you may quickly find a desirable target, many times you are planting seeds for an acquisition down the road.  A potential target may not be ready today but by developing a relationship now, you may be their first call when they are ready in a year or two.

Posted by Brian Ytterberg.


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