Acquisition criteria that actually work
Why most searches fail before anyone picks up a phone, the criteria that matter, the ones that sound good and are not, and why exclusions do more work than inclusions.
Most acquisition searches fail before anyone picks up a phone. Not because the market is thin, but because the brief was never tight enough to tell a good target from a bad one.
“Profitable, well run, in our sector, around five to ten million” is not a brief. It describes several thousand companies and excludes nothing you would actually reject.
What a vague brief actually produces
The same search effort, run against two different briefs.
The criteria that actually matter
A usable brief answers questions that can be tested from the outside, before you have met anyone.
What the business does, specifically
Not the sector, the activity. “Utilities” is not a criterion. “Holds NERS and GIRS, self delivers, works for housing developers rather than network operators” is. The more specific the description, the shorter the list and the better every conversation on it.
Size, expressed properly
Turnover is easy to find and tells you little. EBITDA is what you are buying. Give a range for both, and say which one binds when they conflict.
Geography, and why
If geography genuinely matters, say what it is doing. Depot coverage, travel time to sites, a framework that is regionally awarded. If it does not matter, do not include it, because it removes good targets for no reason.
Ownership and situation
This is the criterion most acquirers leave out and it changes everything. An owner two years from retirement with no successor is a different prospect from a founder who has just taken external investment. Situation determines whether a business is buyable at all.
What must already be there
Accreditations, approvals, a management team below the owner, a specific customer relationship. The things that would take you years to build and are therefore the reason you are buying rather than growing.
The criteria that sound good and are not
- “Good culture.” Untestable from the outside and it never excludes anyone at the search stage
- “Growth potential.” Every business has some. If you mean a specific opportunity you could execute, say what it is
- “Well run.” You would not buy a badly run business at a good price? Many of the best deals are exactly that
- “Synergies.” Name them. Shared overhead, cross selling, buying power, a licence you could use. Otherwise it is a word standing in for a reason
- “Right price.” Give a multiple range you would actually transact at, or the list includes everything
Struggling to get the brief tight enough? That is the job, and it is most of the value. Our 30 day pilot starts by fixing it.
See how the pilot worksThe exclusions matter more than the inclusions
What you will not look at is the most useful part of a brief and the part most acquirers have never written down.
Businesses where the owner has to stay. Anything carrying a specific regulatory exposure. Leasehold where the lease is short. Companies below a margin threshold. Anything where one customer is more than a third of revenue. Sectors your board would not sign off.
Every exclusion you can state removes work and sharpens everything else. Every one you leave unstated will be discovered four weeks into a conversation that should never have started.
How to know the brief is good enough
Three tests.
- Could someone who does not know your business use it to reject a company? If every rejection needs a phone call to you, the brief is not doing its job.
- Does it exclude a business you would genuinely say no to? If not, it excludes nothing.
- Would two people applying it separately build a similar list? If not, it is a description of a feeling rather than a set of criteria.
Write down what you would pay, too
A brief without a price position produces targets you cannot afford or will not stretch for. Say the multiple range, say what you would pay above it and in what circumstances, and say how you would structure it.
Indicative ranges by sector are on the multiples by sector page, and the valuation calculator will show you what drives the difference between the top and bottom of a range.
How we use it
Our 30 day deal sourcing pilot starts with the brief, because a search run against a vague one wastes your time as much as ours. We build the list, approach off market, and come back with businesses that match rather than businesses that are available. If it does not deliver, you get your money back.
Answered.
How specific should acquisition criteria be?
Specific enough that someone else could reject a company without asking you. If every rejection needs a call, the brief is a description rather than a set of criteria and the search will produce noise.
Does a narrow brief mean missing good opportunities?
It is the opposite in practice. A broad brief does not widen your options, it widens the noise, and the genuinely good targets get lost in a long list nobody has time to work through properly. Narrowing improves the hit rate rather than reducing the opportunity.
What do most acquirers leave out?
Two things. The exclusions, which do more work than the inclusions, and the owner’s situation, which determines whether a business is buyable at all. A perfect target whose owner has no intention of selling is not a target.
Should the brief include a price?
Yes. Without a price position the list contains businesses you cannot afford and excludes ones you would have stretched for. State the multiple range you would transact at and what would make you pay above it.
Start with the brief
A search run against a vague brief wastes everyone’s time. We fix that first, then go and find businesses that match.
See how the pilot works