It seems like a common misconception that quality M&A research has one purpose – to take transactions to market. While this is the primary function there are many more ways middle market M&A firms can use quality research and reporting to their advantage. Below we have compiled a list of our top alternate uses of M&A research tools and personnel:
Customer Identification. Not only can research be used to find buyers but it can also be used to find sellers. Being able to quickly reach out to a targeted audience in your geographic area can be an affordable and easy way to generate fast deal flow opportunities. Having a narrowly targeted group of potential clients to approach can be an easy way to cut out a lot of the ‘noise’ when it comes to identifying the real sellers from those not yet ready to be contacted.
Industry Guidance. Often times smaller M&A shops struggle with the question “Should we specialize?”. This is another great example of a question that should be answered by accurate research not mere opinion. While some groups specialize due to industry experience others may simply want to maximize opportunity based on current market conditions. A good M&A research department (or a team like CapTarget’s!) should be able to easily answer this question. By looking at industry classifications research can be used to determine where the opportunity may be.
Valutaion intelligence. Some of the biggest challenges in middle market M&A come with a skewed perception of value. Sellers generally want more than what buyers want to pay. In fact in a recent survey conducted here at CapTarget we found that this value misalignment was one of the top contributing factors to transaction failure. Quality research can be used to mitigate this challenge. By having your research team or tools help identify realistic value expectations early firms can easily weed out potential clients that will present issues at the negotiating table.
Remember – having access to good data drives better decision making, which in turn leads to less time and money wasted!