Mid-market companies that succeed in M&A consistently employ three key strategies, that fuel their growth. The key to success lies in conducting due diligence better than anybody else. 'Better' means that it surpasses competitors' efforts in speed, depth, and focus, which empowers mid-market firms to act decisively when opportunities arise.
Consider the case of a UK-based financial services firm expanding into the Asian market. When eyeing a fintech startup in Singapore, they conducted extensive due diligence, incorporating advanced data analytics and customer sentiment analysis. This effort uncovered revenue synergies 40% higher than initially projected. Armed with these insights, the firm secured the deal, and within 18 months, the combined entity surpassed the revised growth projections.
Conversely, a mid-sized pharmaceutical company learned a crucial lesson when evaluating a biotech acquisition. Through rigorous analysis of the target's clinical trial data and patent portfolio, the acquirer discovered significant risks in the most advanced drug candidates. This insight led the company to renegotiate terms significantly, securing a more favourable deal that accounted for these risks.
This effort uncovered revenue synergies 40% higher than initially projected
These examples underscore just how important rigorous due diligence is in driving mid-market M&A success.
This article outlines three critical steps that drive M&A success in the mid-market.
1. Conduct Early, Thesis-Driven Asset Evaluation
Top-performing mid-market firms initiate due diligence on potential targets before formal M&A processes begin. This enables companies to:
- Develop clear deal theses aligned with strategic priorities
- Move quickly and confidently when opportunities arise
- Avoid wasting resources on unsuitable deals
A mid-sized manufacturing firm really exemplifies this approach. By maintaining a regularly updated list of 15 potential acquisition targets, the company quickly capitalised on an unexpected opportunity. Their preparedness and programatic approach to M&A allowed them to present a compelling offer within days, outpacing larger, less agile competitors.
Successful companies implement this strategy by:
- Updating sector screens quarterly
- Maintaining a prioritised list of 10-20 potential acquisitions
- Developing preliminary deal theses for top prospects
- Ensuring leadership alignment on M&A priorities
This proactive and programatic stance focuses resources on strategic opportunities and positions mid-market firms to compete effectively against larger rivals.
2. Uncover Proprietary Insights Through Advanced Due Diligence
Mid-market leaders gain competitive advantage by generating proprietary insights during due diligence. They employ:
- Advanced analytics
- External data scraping
- Primary research
- Generative AI tools
These methods yield deeper, more nuanced understandings of potential acquisitions than surface-level benchmarks or historical comparisons.
A technology services provider leveraged this approach when considering expansion into cybersecurity. Rather than relying solely on market reports, the company conducted in-depth interviews with IT decision-makers across industries. This primary research revealed an underserved niche in cloud security for small and medium enterprises, shaping their acquisition strategy and leading to a successful deal.
To generate proprietary insights:
- Utilise advanced analytics to process large datasets
- Conduct primary research to understand market dynamics
- Leverage external data scraping for competitive intelligence
- Employ generative AI tools to accelerate analysis
3. Integrate Integration Planning into Due Diligence
Successful acquirers address integration planning during due diligence, not after. This foresight allows accurate estimation of costs, timelines, and resource requirements for a smooth transition.
A regional healthcare provider exemplified this approach when acquiring a telemedicine startup. During due diligence, they identified significant cultural differences between the organisations. They incorporated cultural integration considerations into their valuation model and developed a comprehensive change management plan. This proactive approach enabled accurate deal valuation and laid the groundwork for successful post-merger integration.
To effectively plan for integration during due diligence:
- Identify critical issues underpinning deal value
- Develop an early integration thesis
- Engage experienced leaders in planning
- Prioritise cultural considerations and potential friction points
Addressing these factors early enables companies to maximise synergies and achieve deal objectives post-acquisition.
Successful M&A, particularly in the mid-market hinges on superior due diligence practices. By implementing early, thesis-driven evaluations, uncovering proprietary insights through advanced techniques, and integrating integration planning into due diligence, mid-market firms can compete effectively and achieve superior M&A outcomes. These principles provide a clear roadmap for mid-market companies to identify promising opportunities and execute successful deals in an increasingly competitive landscape.
