Virtual StrategiesThis article was contributed by David Braun, CEO of Capstone Strategic, and author of the forthcoming book, Successful Acquisitions.

If you’re looking to grow by acquisition, the quality of your outcome will depend in large part on the quality of your research. The key is to research both markets and companies—not just individual prospects.  You need to fully understand the environment you are entering, so you can assess the performance of specific companies in context.

The benefits of good research are multiple. You will be able to assess opportunities much more effectively, in relation to your pre-established criteria. Just as important, you will be able to speak with far more confidence when you engage in conversation with prospective sellers. This can immediately set you apart from the majority of other buyers.

Primary vs. Secondary Research

There is a significant difference between secondary and primary research, though both are important. Secondary research, where you draw from public sources such as the Internet and databases, is the easier of the two. When your focus is markets rather than individual companies, secondary research can reveal a wealth of information about market size, growth rates, supply chains, and other market dynamics. The U.S. government, Wall Street, and individual industry associations have plentiful market information publicly available that may be pertinent.

Primary research requires that you talk one-on-one to active players in your selected markets. This process is invaluable for confirming or adjusting what you found through your secondary research, while capturing specific insights from those who deal with those markets every day.

Performing primary research successfully is an art. You are asking for people to spend time with you, answering your questions, with no obvious benefit to them. You must move quickly and be specific about your interests.

Remember, you are not performing a survey but rather conducting an exploratory conversation. In the back of your mind, of course, you have a list of targeted issues about the market you are researching. However, you should avoid bombarding people with a series of questions. Rather, those questions should be mixed with comments and observations that you bring to the exchange.

Who to Contact?

Who should you talk to? Where do you find such experts? In any marketplace, there are three principal groups of players: suppliers, distributors, and customers. Each group may have quite different perspectives on the marketplace.

Depending on the type of company you are approaching, you should also turn to people in different functional areas to gain a good mix of perspectives.

There are other industry experts that may be worth consulting as well. You may begin by contacting industry associations, which can be a valuable source for general trends and statistics. Journalists and editors from publications related to the market you are researching can also give a more detached perspective, while still throwing light on the market dynamics. Finally, if resources allow, you can often access a large pool of knowledge in a short amount of time by attending an industry trade show.

Problems you may encounter & how to solve them

In both your primary and secondary research, your overriding objective is to obtain as much reliable information as possible to complete the metrics you have set out for each criterion. There are a number of factors that can affect the thoroughness and reliability of the information you glean from your research.

  • Resource Allocation: The more time and manpower you can devote to it, the more thorough and reliable your research will be, particularly if you employ the techniques we have reviewed here.
  • Anonymity:  This can present a tricky dilemma. On the one hand, you probably prefer to remain anonymous in your research activities so your competitors do not become wise to your acquisition strategy and preempt it. On the other hand, when you conduct primary research, there may be some sources who are unwilling to talk to you unless you reveal who you are and what company you are from.
  • Forthrightness and honesty are the best policies to follow when conducting research. Although you may be tempted to dissemble to maintain your anonymity, it can be damaging in the long run and destroy your credibility if you are found out. One means of avoiding the complications of limited resources and anonymity is to hire a third party to undertake your research.

Engaging a Third Party (how to solve your research problems)

A consulting firm with experience in market research already knows where to look for key information—both secondary and primary—particularly if the firm specializes in acquisition projects. The firm’s personnel can turn to resources they have used in the past and ask the right questions in order to get the information you need. Third parties do not have to reveal your company name while doing research, keeping your company anonymous until it is advantageous to reveal it. They never have to be dishonest, since they can reveal only basic information you authorize and politely decline if asked for more. Sources generally understand and respect this situation, and it is rarely detrimental to research efforts.

NOTE: This post is adapted from David Braun’s forthcoming book, Successful Acquisitions, now available at