TARGET SCREENING
In the buy-side MA process, careful target screening is the key to the long-term success of strategic partnerships. With our many years of experience, we identify and analyse suitable partners to ensure sustainable and successful integration after the acquisition.
Strategic company acquisitions: target screening for buy-side MA transactions
Target screening describes the systematic search for target companies that meet the strategic, financial and operational requirements of a buyer. This involves not only identifying potential acquisition targets, but also evaluating them in terms of their fit with the buyer’s corporate strategy and objectives. The aim is to filter out those companies that offer the greatest added value and at the same time minimise the risks.
The success of an MA transaction depends largely on the quality of the target screening. Careful screening makes it possible to recognise the best opportunities and make well-founded decisions. Incorrect or incomplete analyses, on the other hand, can lead to costly misjudgements that waste valuable resources.
The steps in the target screening process
The target screening process comprises several steps to ensure that the target companies identified are an optimal fit with the buyer’s strategic objectives:
- Industry and market analysis: a deep understanding of your market is essential. We bring not only extensive industry knowledge, but also experience from similar acquisition processes and a creative outside perspective. This enables us to analyse each new project holistically and uncover relevant opportunities.
- Target research and longlist creation: Based on the target profiles defined in the transaction strategy, we create a longlist of potential targets. We use a wide range of sources, from industry reports and market analyses to network contacts and specialised databases.
- Evaluation and prioritisation: Potential target companies are evaluated based on criteria such as market position, key financial figures, competitive advantages and potential synergies. This step reduces the longlist to a shortlist of prioritised ‘high-priority targets’.
- (Anonymous) contact: The initial approach of the targets is critical to success, especially if they are solid, attractive market participants who have not already initiated a sales process. We address the owners directly, personally and with high-quality postal letters. The buyer can remain anonymous in order to maintain discretion.
- Getting to know the target companies: We coordinate meetings between buyer and seller to get to know each other and organise company visits (target site visits). We then make recommendations on how to proceed with the identified acquisition candidates.
Success factors in target sourcing and selection
To ensure that target selection is a success factor and not a risk, the following aspects should be taken into account:
- Clear strategic objective: Define your strategic objectives and requirements for the target company precisely. This focusses the screening process and increases the hit rate.
- Utilisation of a broad range of sources: Integrate diverse sources of information such as market analyses, industry reports, MA databases and networks to create a comprehensive longlist.
- High-quality contact: Rely on a high-quality, personalised approach to potential targets instead of impersonal emails. In our experience, this approach is much more promising.
- Dynamic evaluation and adaptation: Adapt the evaluation criteria flexibly in order to react to changing economic and market-related conditions.
- In-depth analysis: Avoid superficial analyses in order to prevent wrong decisions. A detailed evaluation should include financial, legal, operational and cultural aspects.
The role of M+A advisors in target screening
An experienced M+A consultancy can decisively optimise the target screening process. It offers access to a comprehensive network and exclusive data sources as well as the necessary expertise to carry out the screening process in an efficient and targeted manner. In addition, an initial approach with a clearly defined benefit profile can open doors for the buyer.
If you are looking for customised support in the company acquisition process from a specialised buy-side M+A consultancy and would like to benefit from an effective target screening strategy, we are your competent partner. Contact us to find out more about how we can help you find the right target companies for your growth strategy and make your MA transactions a success.
Learn more about why sourcing and screening target companies that are not actively for sale can be advantageous in the MA-Science eBook.
CONTACT
Would you like more information? Feel free to contact us anytime!