4 Tips to Build a Robust Pipeline of Acquisition Prospects

Acquisitions are a great tool for growth.  When done right, strategic M&A helps a business to grow rapidly and gain a competitive advantage. Prospect research is a critical part in the M&A process. If conducted properly, it makes the later stages far easier to complete.

Here are 4 tips to keep in mind to help you build a robust pipeline of acquisition prospects.

  1. Strategy First – Any successful M&A process must begin with a solid, strategic rationale. Why do you want to make an acquisition? What do you want the acquisition to accomplish? How is M&A aligned with your overall growth strategy? It is not wise to pursue M&A simply for the sake of it without a real plan in place. It is important to have a strategy in place before you start looking for prospects.
  2. Develop Prospect Criteria – Establishing prospect criteria is crucial. Your prospect criteria should be rooted in your one reason for acquisition, which in turn is based on your larger business strategy.  Start by painting a picture of what your ideal acquisition prospect looks like. Think about factors such as financial performance, geography/location, technology, products/services and customer mix. During this stage, be as specific as possible.  As you identify and evaluate candidates, you can refine your acquisition criteria. 
  3. Evaluate Not-for-Sale companies – While you may only be acquiring one company, it’s not enough to pursue only one acquisition prospect at a time. We encourage you to broaden your search for prospects to include not-for-sale companies. Not-for-sale simply means the owner is not actively considering a sale – not that they will never sell the company. By including not-for-sale companies in your search you significantly expand your universe of potential acquisition prospects.
  4. Take the Emotion Out – Acquisition teams tend to become emotionally involved- sometimes to the detriment of the process. The solution is to have a strong system in place that enables you to take the emotion out of the decision-making process.  As you narrow down your list of prospects, return to those tools at key decision times.

For more tips on finding companies to acquire join our webinar Building a Robust Pipeline of Acquisition Prospects on March 18.