When you’re going after an acquisition, you need clear and compelling reasons— not just for
your choice of target company but for your choice of market. The only way I know to do that right is to define your
criteria in advance. Needless to say, your specific market criteria will be driven by the unique circumstances of your
That said, there are common factors that most people consider when they are reviewing possible markets. Let’s list them here:
Market size (usually measured in dollars of revenue). Remember, bigger is not
necessarily better, and you may find greater success in a smaller, niche market.
So the criterion of size needs to be considered in relation to other factors.
Market segmentation. You will do best to begin by researching and prioritizing
broadly defined markets and then focus in on individual segments in the highest
Market growth rate. This is the simplest (and the only) indicator of healthy future
demand, usually the single most important determinant of success.
Number and strength of major players. The field always narrows at the top,
but the question of how narrow gives an important indication of the competitive
The customer profile. The kind of customer a market serves is significant.
For example, if your experience is exclusively business-to-business, you
may think twice about buying a retailer
Other typical criteria used when evaluating markets are barriers to entry, technology requirements and intellectual property issues.
And again, you may have additional issues to consider that are exclusive to your objectives or business environment. The point to
emphasize is that without predefined criteria, you will be pushed and pulled by whatever data and opinions pass across your desk.
With them, you’ll have a way to make decisions with a measure of objectivity.