What methods can you use to identify acquisition targets or investors for capital raising scenarios?

2 Financial criteria

The second method is to apply financial criteria to filter and rank the target or investor candidates. This means looking at their financial performance, valuation, capital structure, and growth potential, and how they match your client's objectives and expectations. For example, if your client is a profitable company that wants to acquire a distressed target at a low price, you might look for targets that have low earnings, high debt, or negative cash flow, but also have valuable assets or market share that can be turned around. You can use various financial tools, such as financial statements, multiples, ratios, and projections, to analyze and compare the financial criteria of different candidates.

3 Synergies and risks

The third method is to estimate the synergies and risks that would result from the transaction between your client and the target or investor. This means looking at how the combination or partnership would create value or reduce costs, as well as how it would affect the risks and uncertainties of both parties. For example, if your client is a manufacturing company that wants to raise capital from a private equity firm, you might look for investors that have relevant industry expertise, operational efficiency, and strategic vision, but also consider the potential impact of their ownership structure, governance, and exit strategy on your client's business. You can use various valuation methods, such as discounted cash flow, accretion/dilution, or net present value, to estimate and compare the synergies and risks of different candidates.

4 Relationship and reputation

The fourth method is to evaluate the relationship and reputation of the target or investor candidates. This means looking at their history, culture, values, and ethics, and how they align with your client's vision and mission. For example, if your client is a social enterprise that wants to sell to a larger corporation, you might look for targets that have a similar social or environmental impact, or that have a positive reputation among the stakeholders and the public. You can use various qualitative sources, such as testimonials, reviews, awards, or media coverage, to assess and compare the relationship and reputation of different candidates.

5 Availability and feasibility

The fifth method is to check the availability and feasibility of the target or investor candidates. This means looking at their willingness, readiness, and ability to participate in the transaction, and how it would affect the timing, complexity, and cost of the deal. For example, if your client is a public company that wants to buy a private company, you might look for targets that have a clear ownership structure, a motivated seller, and a reasonable valuation, but also consider the potential challenges of due diligence, regulatory approval, and integration. You can use various sources of contact, such as referrals, introductions, or cold calls, to gauge and compare the availability and feasibility of different candidates.

6 Prioritization and selection

The sixth method is to prioritize and select the target or investor candidates based on the results of the previous methods. This means creating a shortlist of the most attractive and realistic candidates, and ranking them according to their overall fit, value, and potential for your client. For example, if your client is a healthcare company that wants to raise debt from a bank, you might prioritize and select the investors that offer the best terms, conditions, and covenants, but also have a strong relationship and trust with your client. You can use various presentation tools, such as matrices, charts, or tables, to summarize and compare the prioritization and selection of different candidates.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?