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Successful Buy Side Mergers And Acquisition Search

Author: , Last Modified, 2017-10-09

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Successful Buy Side Mergers And Acquisition Search

Test Your Investment Criteria

You have completed building your acquisition target profile. You now have to go out into the
real world and see how many targets exist. You not only have to see if that target exists, but
you have to get a sense for how many of them may exist.

And at some point during this process, you will reconcile yourself to the fact that no acquisition target will be perfect. From this point in the Strategic Acquisition Search process onward, we're assuming that you
have enlisted someone in your company to do some of the detailed legwork that will be
required.

The guidance that follows is more for their sake than yours. We've found that there are four ways to search for potential target ideas. Any combination of these approaches can be productive in identifying viable targets.

1. Industry association lists
2. Conference exhibitor lists
3. Subscriber databases
4. Google

The first is to look to industry association lists. You probably belong to an industry Association that has many members that may fit the profile you're seeking. Although it can be very time
consuming, you should review each of the companies in the member directory to determine if they meet your acquisition criteria.

The second is to look for recent industry conferences. The conference websites usually publish exhibitor information. In all likelihood, you or someone in your company is attending
relevant conferences. We've had more success pulling company info from exhibitor lists than walking conference floors, but either way is an option to finding targets.

The third method is to use subscriber databases. We find that one of the most effective ways
to create a broader list of acquisition targets is to access a paid database such as Capital IQ or
FactSet.

With a service like Capital IQ or FactSet, you can search for companies based on business description, primary industry classification, SIC codes, keywords, ownership details, revenue, profit, contact names, and a whole host of other company details that can't often be found publicly. Services like these are comprehensive but can also be expensive, with license
fees in the tens of thousands of dollars per license, per year.

If you are serious about managing the acquisition search process on your own, you may be willing to pay the license fees. Another option is to look to an investment banker for help. We subscribe to multiple paid databases that we use for our search work. These databases are Capital IQ, Fact Set, Bloomberg and OneSource.

This database search is critical not only to help you to expand your target list, but to also
deepen your intelligence on all of the targets on the list including financial data, and company information. For example, if one of the companies on your list was recently acquired by another company, you're wasting your time to pursue this target.

This kind of information is rarely evident after a search through publicly available information, but is almost immediately available in data base.

The last approach is to use Google. It sounds overly simplistic, but Google really is a wonderful
thing. Take a look at your own website, consider some of the keywords that relate to the
industry and the target profile you're seeking.

Conduct a Google search on those keywords and see how many companies you find that appear to meet your high-level criteria. If based on that
search, you have immediately found 10 to 15 companies, the chances are that there are 30 to
40 other companies that meet or come close to your criteria that for whatever reason didn't
display in the search results. We will say that a Google search is the least effective way of
identifying targets versus other approaches.

If after pursuing the approaches noted above, you have a target list of 20 to 30 or more
companies that appear to match your investment criteria, you may have just enough to
proceed. What if you only found 5 or 10 companies that appear to meet the profile
parameters? You may need to go back to the drawing board. Some questions to ask yourself
include:

1. When we conducted the search, did we use the right search terms and apply the search
criteria appropriately?
2. Could we expand our investment criteria to cast a wider net?
3. Does a systematic search process make sense, or does our short list already represent
80-90% of the possible targets in this space?

If the best you can do is 5 or 10 targets, then you either postpone your acquisition aspirations, or you take a long-term approach where most of your effort is spent deepening relationships
with those 5 or 10 target companies to be ready for the moment they come available for sale.