M&A: A Practical Guide to Doing the Deal, 2nd Edition

CHAPTER 6 To Begin an Acquisition Search, the Buyer First Sets the Likely Parameters of a Deal

At any given moment, hundreds of companies are openly for sale in the global market and thousands more will consider M&A inquiries. With so many available deals, the buyer defines his or her search parameters to narrow the scope of its search process.

A good parallel to a corporate M&A search is an individual’s quest to find a new condo. How do people begin the real estate investment process? Typically, they select a neighborhood first, the desired size of the condo second, their budget third, and likely amenities, such as the view and the parking, fourth. The corporate course of action bears similarities.

Defining the Parameters

First, a potential acquirer targets an industry and geographical market (i.e., its neighborhood). It decides on how large a company it can absorb in a combination, and what is a reasonable price to pay. It then considers what specific attributes it wants in a deal, such as a certain customer base, a dedicated supply line, a specific technology and so on. See Table 6.1.

Table 6.1 Setting Parameters: Individual Looking for Real Estate versus Company Searching for Acquisition

Steps	Individual Looking for Real Estate	Company Searching for Acquisition
1	Select neighborhood	Choose industry and geography
2	Size of property, number of bedrooms and baths	Revenue, profit, and asset levels of possible targets
3	Budget, price per square foot for similar ...