November 14, 2023 //
In the previous post in this series, I took a moment to warn against over-relying on Google and other public search engines in conducting market research. I suggest using the same caution regarding the industry use of paid databases.
Like every other M&A firm, Stillwater sometimes uses paid databases—they offer enormous swaths of information on thousands of companies in a single, powerfully searchable location. They are necessary, hold good up-to-date information, and are a powerful and valuable part of our tool-set for market outreach.
But in the end, a paid database can only go so far. As with using a public search engine, these databases will produce good leads, some obvious targets that tick all the boxes. The problem is that apparent targets are evident to everyone—competition will be heated for these acquisitions, and ultimately, a company you want but can’t get to might as well not exist at all. We have to go deeper than a database can take us.
At Stillwater, we work incredibly hard on every acquisition. We leverage every search tool (including paid databases) and capitalize on our long, multi-armed reach into the market. The result is a superior insight into the marketplace on your behalf, which is critical as you move out of the preparatory stage and begin outreach in earnest.
But, superior or not, what do we do with that insight? And how do we get past the “obvious targets” and find the real gold? In response, we creatively define what a good acquisition might look like for you.
By creatively defining an acquisition, I mean that we’re good at finding unexpected matches for your acquisition, companies that line up in ways you still need to consider. Creativity like this can be dangerous if it’s not deployed by practiced professionals. Creative acquisition suggestions must be grounded in skilled investigation and understanding of your company’s needs or capabilities; you can’t fake it with an unconventional prospect. It has to work. A bad creative prospect for acquisition is like an advisor saying to you, “I know you ordered the fish. Here’s the chicken, ” and then explaining why it was the chicken you wanted all along.
If we do our work well as advisors and respect the strategic parameters we’ve developed together, then the prospects we bring you, however creative, will make sense when we lay them out for you.
It is important to remember that acquisitions often require you to change your strategy in order to work. The next step is to analyze the feasibility and impact of those changes. An unconventional acquisition prospect may require you to reconsider your ideas about geography; for example, your vision for retail expansion would work well in a market you’d considered out of your scope or hadn’t considered.
Or it may ask you to reconsider the established boundaries of your service offering. Perhaps as you’ve been looking to acquire a company in a particular slice of the energy sector, you’ve been missing other opportunities in other parts of the same sector that could work even better for you with a little visionary thinking applied.
You may even be presented with an option that seems completely out of left field. Don’t discard those ideas; quality advisors will have done their homework. Hear them out—they may be on to something good.
You can’t forget about the more conventional prospects either, of course. Any good survey of the market will bring you a handful of potential acquisitions that seem perfect—they will tick every box you’ve got like they saw your wish list in advance. These often get the first look, and deservedly so, but there’s a downside to these finds too.
First, as I’ve said, you’ll often find heavy competition around them, but more importantly, as the proverb says, PERFECT is often the enemy of GOOD. For newcomers and veterans to the acquisition process alike, there is a real danger of fixating on the idea of “the perfect match” You can easily miss ten prospects that might serve you better while you’re busy hunting for “The One”.
So, relax your idea of perfection a little, and open yourself up to the possibility that your ideal acquisition might be hiding in an unexpected place. And make sure you hire an advisory team that knows where to look. In expert hands, a little creative thinking in the acquisition process will result in a better deal. Start the conversation with us here
Written by: Douglas Nix