Merger & Acquisition Targeting - Professional Services

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Situation

A global $30MM professional service firm wanted to embark on a national acquisition strategy as part of their growth strategy.  The company had pursued an organic growth strategy by opening an office in a neighboring state. Staffing the new location, developing local knowledge and becoming part of the local network had proven resource heavy and time-consuming.  In support of an acquisition strategy for growth, the firm asked HH to conduct research to identify market segment and geographic target markets that would have good potential for growth.  In addition, HH was asked to forecast the impact on the company’s current financials.

Strategy

First, HeimannHills conducted an environmental scan that included capturing outlook and trends in national, regional and industry sources that resulted in identifying 11 key segment opportunities.  Using credible resources such as IBISWorld, First Research and client-provided industry literature ensured the soundness of the findings.  Upon the firm’s review of the scan findings, additional research was conducted to respond to senior management’s comments that resulted in a decision to focus on four segments that showed higher-growth potential and plans that included capital intensive projects.

Second, Top Performer research began with a pool of 15 publicly-traded companies within the industry, whittled down to seven who met at least two of five key financial performance indicators – profit margin, operating margin, return-on-equity, quarterly revenue growth and quarterly earnings growth.  Additional research yielded information on each company’s growth strategy, geographic and industry focus and product/service offerings.

Combining the research findings enabled us to present an analysis to senior management on where top market opportunities exist, why they are a top market, who is in that market, what products/services are offered, when growth is expected and how they have been successful.  Armed with this market knowledge, the firm developed a profile for their most attractive acquisition targets based on location, size and product/service focus.  Based on the target profile, impact on the financials was determined via a customized pro forma that allows senior management to assess the financial impact of various execution strategies.

Impact

The firm developed a multiple-acquisition strategy with the goal to acquire three-five companies in the next five years.  Acquisitions will first be searched from currently available companies for sale with a possible solicitation strategy to firms that fit the target profile but are not up for sale.

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