Why You Should Spend More Time Thinking About M&A Screening Strategies

M&A Screening Strategies

Outlining an M&A roadmap for discovering and cultivating new growth engines begins by profoundly learning a different strategic course and differentiated abilities. The M&A roadmap should stem from corporate strategy. M&A, in aid of realizing new sources of growth, too needs a robust in-house skill extended by external sources. Successful acquirers follow private equity firms in their M&A screening strategies, with a formal investment board and continuous updates to the target list.

Identifying growth and capability assets implies stretching the aperture on potential sectors and targets, possibly venturing past subsisting business boundaries. If not overseen by a cohesive strategic direction and achieved systematically, there is a material risk of contracting deal fever and purchasing precious assets that don’t fit.

A robust M&A screening capability for current growth engines resembles like this:

  • Develop a high-level M&A roadmap originated from the corporate strategy.
  • Open the aperture on possible sectors for investment, analyzing future profit pool shifts.
  • Conduct a continuous Agile program for screening for targets and engaging with them.

M&A screening strategies roadmap 

A transparent M&A roadmap in the assistance of the more comprehensive corporate growth strategy produces coherence to M&A disciplines. M&A goals move across different time horizons, and the kinds of M&A transactions should assist satisfy those objectives and financial ends for every time horizon. For example, short-term business goals needed tuck-in deals, whereas medium- and long-term goals relied further on scope deals and venture capital–style purchases, apiece.

Open the gap

Most businesses exercise an inside-out method for M&A. They begin with the prevailing market and consider the vectors beside which they can develop. Effectually scouting for new growth and capability targets, nevertheless, needs an unconstrained view. That implies not restrained by historical facts and expertise.


M&A screening strategies

Undoubtedly, the emerging strategy is outside-in. It begins with recognizing high-growth sectors in a more comprehensive addressable market, including an evaluation of how profit pools may evolve in the future and where the smart capital is going. Then one can narrow it down to areas that have a strong match with subsisting differentiated abilities that specify the right to succeed in these more innovative businesses. Segments and targets classified employing the outside-in approach, however, need to apply to the current portfolio of assets. Acquirers are inclined to be more victorious, advancing after attractive businesses in which they can marshal unique abilities to generate a joint value proposition.

Conventional M&A screening is swiftly unfolding into more extensive market sensing. Many companies have established their own corporate venture capital systems to draw them closer to grassroots shifts that they might refrain when employing a traditional M&A lens. Some have CVC units functioning within their M&A units, offering M&A as a service to business units. While direct M&A emanating from a company’s own CVC unit is modest, the broader market-sensing abilities it presents for minimal capital investment is completely justified. Everyone understands that CVCs is a journey to the long game and that they allow executives to have a more in-depth viewpoint on things they may desire to own entirely in the future.

Agile M&A screening strategies to decision making and target engagement

Target M&A screening strategies traditionally conducted applying a funnel method in which acquirers would build a long list, narrow it down to a shortlist based on determined screening criteria, and then advance with further target profiling. Thoughts from investment banks would typically run into the long list or get assessed opportunistically.

The canvas needs to be more widespread in a hunt for scope targets. Businesses are obliged to extend their view of the sectors in which to buy, the investment ideas (single play or multitarget play), and the flow of these investments.

Most businesses are slow to move on target shortlists. In scope transactions, and necessarily capability deals, in which the level of experience tends to be low, target engagement needs to begin earlier so that an acquirer can study more about the skills over time. The ablest acquirers start a conversation with targets and keep it proceeding to prepare the ground for an ultimate deal.

Firms that expand the capabilities to explore outside immediate business boundaries generate proprietary deal flow and get differentiated assets quicker than anyone else. That provides them a significant position in today’s competing deal market.


  • A differentiated end-to-end M&A ability that connects straight to the corporate growth strategy is the typical denominator of the most successful acquirers.
  • One of the foundations of a robust M&A capacity is a continuous and systematic exploration of acquisition targets and early relationship building.
  • In today’s disruptive climate, regular target screening is swiftly unfolding into developing broader market-sensing abilities as a corporate growth strategy requires generating new growth engines.
  • New methods enable acquirers to broaden the aperture on areas and targets and increase the understanding of the broader ecosystem.


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