Before you look at a single company
First acquisitions fail most often because the company bought something interesting rather than something it needed. Write down what the deal must do: add a capability, enter a market, acquire customers, add a team. Then write what it must not do: distract the core business, stretch the balance sheet or bring in a culture that will not fit.
That becomes the thesis. Our note on building an acquisition thesis before a target list covers the framework.
The playbook
- Set criteriaSize range, geography, services, customer mix, owner situation and deal-breakers.
- Map the marketList every company that fits, whether or not it is for sale.
- Approach ownersMake direct, confidential contact. Many good first acquisitions are owners who had not planned to sell yet.
- Screen fastTwo short conversations should tell you whether a target fits. Don't fall in love early.
- Value with structureUse earn-outs, seller notes or rollover equity to share risk where the future is uncertain.
- Diligence what mattersCustomer concentration, key people, contracts and the quality of earnings.
- Plan the first 100 daysWho leads, what changes, what doesn't, and how customers and staff hear about it.
A first acquisition, in four phases
Before any companyDecide whyWhat the deal must addWhat it must not doCriteria and deal-breakers
Map and approachFindMap every company that fitsApproach owners directlyScreen in two conversations
Value and diligenceDealShare risk with structureDiligence what matters
First 100 daysIntegrateWho leadsWhat changes, what doesn'tHow customers and staff hear
A first deal small enough to integrate well
Mistakes we see
- Buying the first company that becomes available.
- Letting the seller's broker set the pace and the information flow.
- Underestimating how much management time integration takes.
- Skipping the conversation about what the seller does after closing.
Frequently asked questions
How big should a first acquisition be?
Small enough to integrate without putting the core business at risk. Many companies start with a deal well below their own size.
Do I need a banker for my first acquisition?
Not necessarily. You need help with sourcing, valuation, structure and negotiation, plus legal and accounting advisors for diligence and documents.