European M&A Community Summit: M&A: Issues in target search - does technology help?

The M&A process can be complex and challenging, especially when it comes to targeting potential acquisition targets. While the goal is to find a company that fits well with your own, this step is critical to the success of the entire process. However, there are many issues that can arise during target search that can derail the process and cause delays or ultimately lead to a failed acquisition.

One of the main issues is identifying the right targets to pursue. With so many companies out there, it can be difficult to know where to focus your efforts. Some companies may appear to be a good fit on paper, but end up being a poor match in reality. This is why it's crucial to do your due diligence and thoroughly research each potential target before moving forward.

Another issue is competition. Other companies may be interested in the same targets you are, which can create bidding wars and drive up the cost of acquisition. This can cause you to either overpay for a target or lose out on the opportunity altogether. It's important to have a clear strategy in place for how you will approach target search and acquisition to mitigate this risk.

Furthermore, regulatory concerns can also play a role in target search. Certain industries can be heavily regulated, and acquiring a company in one of these industries can mean navigating complex regulatory environments that can slow down the process and add additional costs. It's important to have a strong understanding of regulatory requirements and limitations before pursuing a target in a regulated industry.

Regarding technology for target search, there are a few different approaches to target search. They differ in search technology used, underlying set of data and by matchmaking algorithms. Many use search technology that we have since many years. The problem is that the underlying set of data often is the internet, which is unreviewed, has low quality overall and only covers public information. That is where tools come into play that make use of proprietary data sources, esp. financial data about potential targets. Ok, so now you have the financials. Even the financials don´t say it all and do not allow to determine strategic fit of a target with an acquirer. That is where advanced target search and matchmaking tools can provide help. They make use of a model of the buyer and target strategy or of a model of the business network and business relationships around targets.
In conclusion, target search is a crucial part of the M&A process that comes with its own unique challenges. Proper due diligence, a clear strategy, and an understanding of regulatory concerns can help mitigate the risks and ensure a successful acquisition. As with any aspect of the M&A process, working with experienced professionals can help navigate these challenges and lead to a successful outcome.

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