Reactive M&A is a great way to become distracted, go after unproductive deals, and tie up internal resources.
In order for M&A to be effective, you have to be proactive. M&A is a great tool to have and should be a part of your growth strategy.
So, how do you find target companies?
Sabeeh Khan, Director of Corporate Development at Infoblox, talks about effective deal sourcing through market mapping in this article.
"If you want to do successful M&A, you need to be proactive and identify your needs rather than waiting for opportunities." - Sabeeh Khan
As a corporate development professional, you might think you understand the landscape of what your competitors are doing. However, no one understands it better than the product team and business leaders, which is why you need to create a market map.
The objective of a market map is to increase relevance within the served industry through strategic acquisitions within each industry ecosystem. Creating a market map allows practitioners to narrowly focus their M&A priorities and have deeper alignment with the business unit on the M&A strategy. It requires collaboration with the business unit leaders, product team, corporate strategy team, and many others.
When creating a market map, put the core solution or main product in the middle. Have conversations with internal folks, and then surround the core solution with categories by function.
From there, break down all the categories into subcategories needed to sell the product, retain customers, and operate the business. Prioritize them from highest to lowest, based on total addressable market, technological needs, or market demands.
Finally, identify and put a check on the ones that are already part of the process.
Now, it should be possible to see the potential areas to pursue for an acquisition and list down potential target companies based on the capabilities needed.
Target companies can come from anywhere. The critical part is the information and the data points gathered from various sources. Collect intel from white papers, publications, websites, press releases, news articles, industry events, etc.
Prioritize companies based on the gathered data, and confirm the information after signing an NDA.