The pitfalls of using paid financial databases for acquisition targets identification

Most professional services organisations will use one or more of a number of financial company databases to identify acquisition targets. They are very useful tools in identifying companies (and we sometimes rely on them for initial phase research) but in our experience they do not provide an accurate representation of ALL potential targets due to two principle factors:

  1. Financial databases often rely on aggregating data from individual sources and as such the accuracy depends on how a company is originally registered and tagged. A company may start operations using one industry code but years later morph into providing products and services in many other industry segments. An example that may be considered is Amazon (agreed its a listed company and not an SME, but it’s appropriate for this example), which began life as a pure online retailer but now also has a significant computing business, AWS, which has its own set of competitors and market dynamics. A market analyst in a professional services firm seeking computing acquisition targets using industry codification would miss AWS as the overall company would be listed under ‘retail‘ or ‘mail order businesses‘. This type of research requires a wider analytical mindset and understanding of markets.
  2. Financial databases aggregate data from individual financial company sources and provide mainly top level financial data. They do not present other financial data of those companies which are much more detailed and uncover a lot more detail about the activities of acquisition target companies.

Company Insight takes a wider view of research when it comes to acquisition targets. We aim to identify all possible companies of interest with the parameters set by a client. This means we browse all available online sources of company data, including directory searches, but we also examine the individual financial sources and extract all the necessary financial information about a company, not just the top level turnover and profit data.

We also extract a standard 3 year history of that detailed financial data to show a progression of performance. This means we provide a very comprehensive acquisition target research service for our clients. We only work on a few selected assignments per year, meaning we provide dedicated first-class acquisition target research services for our clients.

If you are seeking to expand through acquisition, and are seeking a number of acquisition targets for your process, please get in touch for an confidential discussion.



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