Best Industries for Acquisition
January 17, 2024
by a searcher from University of Toronto - Joseph L. Rotman School of Management in Vancouver, BC, Canada
I'm a self funded searcher with background in Operations Leadership (leading a few hundred folks at a warehouse). Rather than doing an industry agnostic search, I want to pick upto 5 industries. I see people picking industries where they have a unique skillset such as healthcare, manufacturing etc. - I don't have experience in any particular niche - just people leadership in operations.
Thus, I'm looking to pick industries/ categories where there may be an option to expand more later down the line (not in the initial years). I think Home Services is a good fit for me. I'm not sure what other industries are the top rated (if that's a thing) amongst searchers who are not buying in field they have experience in.
from Ludwig in München, Deutschland
On the other hand, you should choose search areas with a sufficient number of target companies. If you calculate your outreach speed (e.g., sending out a lot of standardized letters with 1,000 letters per week or very individualized emails with 100 a week) and project this number over two years, you'll have your minimum size. I was recommended to target approximately 20,000 companies of the right size, but never fewer than a few thousand. I used Orbis search per branch to determine this number (and was really surprised about some sub branches, where almost no target in my range existed and i would have lost a lot of time to find this out on a case by case base).
But before that, I utilized all IBIS reports on Searchfunder in my country to create an industry priority list, which included growth rates, EBITDA margins, and so on and only choosed the one with a personal fit. This approach helps me avoid wasting time searching in industries where I might only find a handful of top-tier companies, which also carry the risk of reverting to standard growth/EBITDA margins, etc.
It's important to be aware that even as a self-funded searcher, you still need to convince the seller and potentially a lender that you can handle the industry/company. The general rule is, if you wouldn't qualify for a top management job in that industry, you may not be well-suited to purchase a company in that field. Even if this general rule might not always hold true and the seller may not care enough, it's likely that your purchase price and/or your future performance will be negatively affected. It took me months to find the sweet spot between my skill set and "sexy" industries and i would invest it again.
I am also an operations guy (including responsibilitity for logistics warehousing with 3-digit employees) and did not come up with enough targets. But i worked always for consumables companies, so apart from services with many employees, this is my second search industry.
from Indian Institute of Technology, Delhi in Toronto, ON, Canada