5 Tips for Finding the Right Markets for Acquisition

You’ve identified the perfect company to buy. The target has solid financials, a state-of-the-line facility, and a well-recognized brand name. Acquiring this company would double your revenue today. So, of course you should go for it. What could go wrong?

Wait! Before you sign on the dotted line, make sure to conduct thorough market research. One of the keys to acquisition success is identifying the right market where demand for the target’s products and services is growing. In general, most companies want to operate in a high growth market where demand for their products are services is on the rise. I have never encountered a CEO who is happy to find their company’s market is declining.

Unfortunately, when it comes to pursuing acquisitions, many seem to lose sight of this principle and instead focus solely on finding a list of companies without conducting a thorough analysis of market dynamics. After going through the entire process of finding a company, negotiating and papering a deal, how awful would it be to discover by surprise after the deal closes that the prospect’s market is contracting?

The best way to avoid this critical error is to research markets prior to selecting individual companies. Here are a few tips for finding researching markets for acquisitions:

  1. Focus on future demand – Your clients are the key to long-term growth. When researching markets, make sure to keep your clients in mind. Pay attention to trends and anticipate how you can meet their needs in the future.
  2. Define your ideal – Before you go looking for information, make sure you know what you are looking for. Create a set of four to six criteria that describe your ideal market. It’s always best to start with your ideal to guide your research and ensure you stay aligned with your strategy. Maybe the “perfect” market doesn’t exist, but you can always try to find one that’s close to it.
  3. Be objective – Don’t evaluate markets based on your gut reaction. Instead weigh the pros and cons using tools and measurable criteria to objectively evaluate and process your findings.
  4. Stay relevant – In today’s information age, seemingly infinite data is out our fingertips. What’s more difficult is finding reliable information that you can use to make decisions. Use your ideal market criteria to cast aside irrelevant findings to focus on what matters most to you.
  5. Be thorough – It’s important to pair information from secondary sources like databases and websites with first-hand knowledge from key industry players to get the full picture.

Don’t make the mistake of buying a company in a declining market. Do market research before looking for acquisition prospects.

Learn more about market research in our upcoming webinar.

How to PIck Top-notch Markets

Date: Tuesday, February 20

Time: 1:00 PM EST / 10:00 AM PST

CPE credit available.

Photo credit: Keith Williamson via Flickr CC BY 2.0