M&A Buyer: How to Create Target Lists - dummies

M&A Buyer: How to Create Target Lists

By Bill Snow

For Buyers in M&A deals, the job of creating a target list of businesses you want to buy begins by defining the “whats” of the target:

  • What type of business do you want to acquire? A product extension? A new product or service? Entrée to new markets? A competitor?

  • What’s the revenue range? What revenue level does the target need to be worthwhile? How much is too much or too little?

  • What are your earnings requirements? Does an acquisition need to be accretive to (increase) your company’s earnings per share, or are you willing to acquire a money-losing company?

  • What are you willing to pay? Are you prepared to pay a premium or are you strictly a bargain-basement Buyer?

  • What do you want ownership/management to do after the deal is done? Do you want or need the target’s higher-ups to stay on board and continue to run the business? Or do you prefer to replace them with your own team?

  • Where do you want or need the acquisition located? Okay, this one isn’t really a “what,” but it’s still an important consideration. Does the target’s location matter to you? Do you intend to keep the acquisition at its current location or fold its operations into your existing locations?

None of these questions has a right answer. The right answer is whatever constitutes the right fit based on your specific needs as Buyer.