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Target identification

Take the guesswork out of making acquisitions

Aaron Grossman

May 17, 2018

By: Aaron Grossman

When we first decided to pursue an acquisition strategy to accelerate our growth goals, we had to understand what the ideal acquisition should look like. As a beginner to this process, my first reaction was centered around the profitability of the potential acquisition target.

Once our team began to ask more questions and dive deeper into the exploration around this subject, we began to uncover additional requirements that would be necessary to ensure a successful result. Ultimately, our goal was to paint a picture that helped us easily identify the one target that stood out from the sea of potentials that existed within an industry that contains 20,000 companies.

As we began the process of uncovering “The One,” we first did a self-check to understand our makeup. In doing this, we were able to identify some important levers that we would then apply to our sourcing of potential targets for acquisition.

Diversified portfolio

Prior to beginning to execute on our acquisition strategy, our customer portfolio was highly diversified. At the time, our biggest customer was no more than four percent of our total revenue. We weren’t beholden to one customer, in particular. In our world, ALL customers were important to the health and well-being of our organization. As a result, we wanted acquisition targets to have a diverse customer base that closely mirrored ours.

Pricing

Having a diversified customer portfolio means that we tend to solicit small and mid-sized companies where heavy volume is typically not found. We are really comfortable providing a high-service solution to companies that might utilize our services once or twice a year. Our pricing model reflects this. There are other staffing agencies throughout the U.S. that focus on high-volume national business and they price to the economies of scale around this model. These agencies would not be a fit with our go-to-market strategy and therefore, not be a viable target to consider

Leadership

In our current structure, we had organically created several small, specialized staffing companies to provide focused service offerings to our clientele. Each of the staffing companies we had created had their own leadership and staff to support them. As the CEO of the overall company, I was not leading or managing any of the individual staffing companies we had established. Therefore, we determined that an acquisition target must have existing leadership that could effectively operate the business once we purchased it.

At the macro level, we wanted to develop a very simple way to quickly identify whether or not an acquisition target was truly viable. The three levers above simplified the sourcing process for us, and we ended up establishing criteria that we would use when making a decision on whether to take a deeper look into a business — or simply pass.

I feel strongly that coming up with a simplified approach to how we evaluate acquisition targets has really enabled us to be laser focused on identifying “The One” when we see it. In fact, we were able to know within 15 minutes of looking at the prospectus of the last two acquisitions we completed, that they would be the ones we wanted to buy.

Aaron Grossman is CEO at Alliance Solutions Group and has grown the business to support nine specialized staffing and recruitment brands across a variety of industries. He was recognized as a 2016 Ernst & Young Entrepreneur of the Year® Award winner. He also founded the Wrestlers in Business Network.

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