Chris Evans

8th April 2021


How to Spot an Acquisition

Mergers & acquisitions could be set to rocket over the next two years as companies increasingly look to move past the darkness of the past 18 months and into a period of strong recovery.

Recent crises have exposed many companies’ dependencies and weaknesses. Many business leaders are, as a result, looking to diversify and move into new markets or acquire new expertise to ensure they are less exposed in future.

Many companies have been left in chronic need of additional capital to get back on their feet and new owners could be the simplest way to steady the ship. Plimsoll’s latest analysis on more than 1600 UK markets show 22% of business are in financial trouble.

All the ingredients are in place for a wave of consolidation regardless of the markets you serve, the expertise you have or your history. But the big question for most companies remains - how do you spot an acquisition that is right for you?

Plimsoll specialises in helping companies find the best possible targets. Since 1987 we have been analysing industries and the individual businesses that operate within them. In that time, we have developed a simple set of processes to help any company find their perfect acquisition targets.

Step 1. Decide the aim of your acquisition

It might sound obvious why a company would want to acquire another business: to grow their current operations. However, the reality is far more nuanced. There are several reasons you might consider an acquisition:

  • To move into a new market
  • To acquire distressed competitors and consolidate your position
  • To buy in new products
  • To buy a supplier or a customer
  • To buy in expertise in a new field
  • To move in new countries

Deciding why you want to acquire another business should always be step one as it allows you to assess the alternative options. Would you be better starting from scratch with a new business? Which areas should you move into?

Step 2. Identify your criteria

Once you have identified why you are acquiring another business and your overall strategic objective it’s time to start thinking about your criteria and what type of business you might want to acquire. There are several decisions you need to make including:

  • Your overall budget
  • Your geographical criteria
  • The future potential of your targets
  • Whether to buy a distressed business cheaply or pay a premium for a strong option
  • If you are looking to diversify which market should you look to invest in
  • What the alternative options are

When deciding your criteria, it will often pay dividends to not be too specific at this stage. A fantastic target just outside of your criteria can often be missed if adhered to too strictly.

Step 3. Research your non-financial aspects

Not all mergers and acquisitions are based on financial considerations. Once you have developed your criteria, extra research is required to find the right group of companies that have the additional elements you are looking for in your new company. These elements include:

  • Current contracts and customer base
  • Patents and product sets
  • Expertise and skills
  • Supply and value chains

Identifying the companies or type of companies that have these elements in place could save you time and effort further down the buying process and allow you eliminate targets early.

Step 4. Build your list (or several lists)

By this step you are well on your way to executing searches and building your ultimate acquisition list. Some companies might even build several lists including one to consider now and one for the future. This initial step is the most laborious and where Plimsoll can reduce the time and cost from months to mere minutes.

We offer a variety of products and bespoke services that will take your criteria and the type of acquisition you want to make and find the companies that meet it. Plimsoll can take millions of companies, billions of pieces of financial data and distil that down to just the companies that are right for you to consider.

Doing the same manually is painstaking work and part of the reason that many companies finish their acquisition search before it has really begun.

Step 5. Filter the results and score your options

Once you have a list of all the companies that meet your criteria, acquirers need to whittle the number down to the 10 – 20 ideal options. This is the most important stage of the entire process and is where companies start to eliminate otherwise strong options.

Our team of specialists work on a one-to-one basis with clients to filter all the companies down to a manageable final list. We recommend that a final acquisition shopping list should include no more than 20 companies and be based on:

  • The best strategic and cultural fit
  • The most financially viable options
  • The companies with the most potential
  • The companies closest to your regional criteria

Step 6. Time to act

Now that you have whittled down thousands of options and have the 10-20 that perfectly match what you are looking for, you are ready to start the formal approach process and communicate your plans to other stakeholders in your business. Imagine the convenience of giving your fellow board members, shareholders, advisers and even prospective sellers the relevant information they need to make the best decision.

Plimsoll is the leading provider of financial analysis and acquisition-based intelligence and reduces the process of searching and filtering the best options from months to mere minutes. While your competitors are trawling various data sources and relying on word-of-mouth ideas, Plimsoll can furnish you with a list of targets that meet your criteria exactly.

Since 1987 we have serviced some of the most famous names in corporate Britain and helped companies of all sizes in all industries to find their own acquisition opportunities. The first step is completely risk-free – just tell Plimsoll your criteria and we will tell you how many companies meet it – free of charge. Simply call our dedicated team on 01642 626400 or email to get started today.