Research is the main differential

Research is the Backbone of M&A

by admin

Research is the main differential

Research is the Backbone of M&A

by admin

by admin

 

Research is the backbone of M&A

If you look at our research page you will see 2 videos from IBM about their system called ‘Watson’. The first video explains how M&A can use it to find target companies. The second video explains how it works, and how it is a totally new concept in computing. Artificial Intelligence is definitely on its way.

Until then, we still have to rely on older research techniques. They are just as accurate but definitely slower than ‘Watson’. M&A is all about matching two parties together where there is the desire to benefit from a purchase. To find that desire needs research. We need to establish the opportunity within the seller and we also need to find companies that will benefit from that opportunity.

Sellers are often too close to their business to see what is happening there, let alone being able to spot hidden opportunities. We also need to see how those opportunities could relate to companies that do not realise the impact such an opportunity might have on their existing business. The insight and process is quite complex.

 

Finding Opportunities in Sellers

Most companies offer many opportunities, most obviously their clients and their people. There are also many financial opportunities, such as economy of scale savings. You don’t need two admin departments, two creative departments or two sales departments. It depends on the company, but savings are always there in the background. The best deals, though, are all about creating more business.

What would happen if two companies in the same sector got together? The client base would expand – even double – for both of them. Perhaps one company might be more advanced in its online sales so the other one could shortcut lengthy development and achieve an instant increase in their own online sales. People working in any business are always familiar with their own opportunities, but they often cannot relate those opportunities to potential buyers.

Jeannette Bitz, chief strategist and managing principal at Engage, says: “As a business owner, I’m focused and motivated, but I don’t always make time for strategic thinking because I’m busy serving clients.”

 

Finding Buyers who just might be excited by what an opportunity might bring

Then we need to find potential buyers who could benefit from what a seller has to offer. To find those potential buyers takes research. We look for companies operating in the sectors we consider most likely to benefit from that opportunity.

Cross border buyers are always a serious consideration, although each company must be analysed. We can use several filters such as financial size and resources. Analysing what the companies actually do needs research, usually online. We enter details into a spreadsheet and compare them. Those details can include companies’ key people – who they are, their age and their strengths within the business.

Research can only go so far. At some stage we need to make contact and talk. After the initial contact stage, the filters reduce the number of target companies. We usually aim for about 200 potential acquirers to start with—

 

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