3 prospect list building mistakes to avoid in M&A

January 9, 2017

Ah, the prospect list.  Nearly everyone at any M&A firm regardless of size has built a few prospect lists.  Here at CAPTARGET, we have built many thousands of lists over the years ourselves.  Along the way, we have noticed a few common mistakes M&A firms make when compiling a prospect list.

Below we share a few of these common prospect list mistakes and easy fixes from the M&A prospect list experts.

#1. Unrealistic criteria

Many M&A firms look at such a narrow, exact fitting criteria in order to limit overexposing a client’s transaction that they significant reduce the probability of closing a transaction.  It is a rarity that you truly know who will buy your client before gauging the market’s interest.  That said, you should be open to casting as wide of a net as possible to ensure that no possible buyer is missed.  Consider secondary or even tertiary matches.

If your client sells spa covers, consider contacting companies that are up or down in the supply chain like spa manufacturers or large retailers who may want to verticalize.  Consider companies that sell or manufacture pool covers who may want to make a lateral move or PE groups that simply like recreational consumer products.  In short, there is rarely an argument that your prospect list should stay very short – by definition, it can decrease your odds of finding a buyer significantly.

#2. Incomplete information

As the M&A space evolves we see more companies pivot to email and online marketing to share possible deals with the buyer universe.  While there is still an argument for physical mailers and cold calls, the fact remains that email marketing is the lowest cost, highest return way to shop a transaction.

When building a prospect list, do not ignore key data points because they are difficult to find.  Identifying the correct contact, testing their email and writing personalized outreach can significantly increase your odds of getting a positive response.

While having a generic address or contact person can work, solicitations almost always work better when you have as much information about the buyer as possible.  Cutting corners, omitting information or undervaluing these data points will cost you money in the long run.

#3. Single information source

So often we talk to prospective clients who make statements like ‘We already use XX data source’.  While a single source of data is a good start, there is no silver bullet when it comes to prospecting especially when contacting other privately held middle market companies.  Because of this we always encourage M&A professionals to aggregate data from as many sources as possible.  Since buying many data tools can be expensive, consider working with CAPTARGET, allowing our analysts to lever a number of resources to ensure you have a balanced buyer pool.

Regardless of who at your firm compiles your prospects lists or how they handle the process, consider the above when developing your next prospect list. Having handled many thousands of prospect list projects, we know first-hand the value of a well-curated prospect list.