A serial acquirer typically builds a database of the companies competing in the market in which it has an interest. This may be organized as a matrix, with each company categorized by such factors as revenue, profitability, cash flow, growth rate, number of employees, products, intellectual property, and so forth. The database will never be complete, since privately-held companies in particular are not willing to reveal information about themselves.
Nonetheless, there are many sources of information that can be used to continually improve the database, such as:
- Public information. There may be snippets of valuable information in press releases, industry publications, product brochures, and company websites.
- Public filings. It is much easier to collect information about publicly-held companies, since they are required to reveal a large amount of information about themselves in the annual Form 10-K and quarterly Form 10-Q.
- Personal contacts. Trade shows are an excellent place to learn about other companies. Also, the acquirer’s own sales staff may have excellent connections within the industry. Other possible sources are business partners and employees hired from other companies within the industry.
- Third party reports. Third parties may occasionally release industry analyses that can be purchased. It is also possible to obtain market analysis reports issued by industry analysts who work for large brokerage houses. Such reports are not necessarily updated on a regular basis, so this type of report should be treated as supplemental to other information.
- Patent analysis. An acquirer could hire a patent attorney to investigate the key patents impacting the target market, and who owns them. By examining the dates on which patent applications are filed, this may also reveal the direction in which technology trends are moving in the industry, which can be of use in determining the best acquisition candidates.
Pursuing this level of data collection over a long period of time can yield a detailed database that gives an acquirer excellent insights into the structure of the industry and which companies could potentially be valuable acquisitions.
The acquirer should also maintain a listing of the acquisitions that have taken place in the industry recently, with particular attention to the market niches in which they are most common. This is useful for discerning the prices at which other sellers might expect to be sold, since everyone in the industry reads the same press releases, and so is aware of the acquisitions. A recent upsurge in prices might indicate to an acquirer that the market is overheated, and not worth participating in during the near term.