Insights — Acquisition & Buy-and-Build — 4 min read
How Many Acquisition Targets to Identify?
Should you look at 5 companies or 500? Understanding the acquisition funnel is the first step to building a repeatable pipeline.
In short
The number of acquisition targets to identify depends on the target conversion rate and the depth of the available market, but a healthy initial longlist typically contains 50 to 100 potential strategic targets. Through successive rounds of research and filtering against the acquisition thesis, this funnel should narrow to a shortlist of 5 to 10 high-priority targets for active outreach. Maintaining a pipeline of this size provides enough options to be selective while remaining manageable for the commercial team overseeing the process.
A common mistake for first-time acquirers is starting with too few targets. They identify three or four businesses they admire and pin all their hopes on those. If none of those owners are ready to sell, or if the price expectations are too high, the acquisition strategy grinds to a halt. Conversely, looking at hundreds of targets without a clear filter leads to 'analysis paralysis' and a lack of momentum.
The key is to view acquisition as a funnel, much like a sales pipeline. You need enough volume at the top to ensure quality at the bottom. This article discusses how to determine the right scale for your search and how to move targets through the stages of identification, research, and prioritisation.
The acquisition funnel: From universe to shortlist
To get to one completed acquisition, you usually need to start with a much larger pool of potential strategic targets. While there are no hard rules, the following ratios are a useful illustrative guide for a strategic B2B acquisition programme:
- 01The Universe (200+ companies): Every business in your sector and geography that meets basic size criteria.
- 02The Longlist (50-100 companies): Those that pass a preliminary filter against your acquisition thesis (e.g., sector, location, core service).
- 03The Shortlist (5-10 companies): High-priority targets that have been researched in depth and show the strongest strategic fit.
- 04Active Conversations (2-4 companies): Targets where contact has been initiated and there is mutual interest in exploring a strategic combination.
- 05The Deal (1 company): The single acquisition that survives due diligence and negotiation.
Why more isn't always better
It is tempting to think that identifying more targets increases your chances of success. However, there is a point of diminishing returns. The more targets you identify, the less time you can spend researching each one. High-quality off-market acquisition depends on tailored outreach, which is only possible if you have a manageable number of targets to focus on.
Focusing on 50 high-quality potential strategic targets is far more effective than casting a wide net over 500 low-quality ones. Evans focuses on this quality-first approach, using research to identify the targets that genuinely matter to your business rather than just listing everything in a directory.
Factors that influence your target count
The 'right' number of targets will vary depending on your specific commercial context:
- Market Maturity: In a highly fragmented market (e.g., HVAC maintenance), there may be hundreds of viable targets. In a consolidated market (e.g., aircraft manufacturing), there may only be five.
- Acquisition Thesis: A broad thesis ('any profitable B2B service in the UK') requires a larger longlist than a narrow one ('specialist pump manufacturers in the Midlands').
- Management Capacity: How many relationships can your senior team realistically manage at once? Acquisition is time-consuming.
- Urgency: If you need to scale rapidly to meet a specific market opportunity, you may need a larger pipeline to increase the probability of a quick deal.
The danger of the 'Target of One'
Many business owners fall into the trap of pursuing a single target they've known for years. This is high-risk. If the deal fails, you have no backup, and you've lost months of momentum. Even if you have a 'dream target', you should still maintain a shortlist of other potential strategic targets to provide leverage and keep your options open.
Drawbacks of a large pipeline
Maintaining a large pipeline of 100+ targets is resource-intensive. It requires constant monitoring and research to ensure the data stays current. There is also a psychological cost: tracking dozens of deals that 'might' happen can distract management from the core business. This is why we recommend a staged approach, where you only commit deep research time to the top 10% of your list.
| Pipeline Stage | Resource Intensity | Primary Activity |
|---|---|---|
| Longlist | Low | Basic data collection and thesis filtering |
| Shortlist | Medium | In-depth commercial research and signal monitoring |
| Outreach | High | Relationship building and strategic dialogue |
| Due Diligence | Very High | Financial, legal, and operational verification |
Signals, not certainties
When identifying targets, it is vital to remember that a 'good fit' is not the same as a 'willing seller'. We identify potential strategic targets based on their commercial profile and public signals. These signals—such as a director reaching retirement age or a change in the company's filing history—are indicators, not proof. The purpose of identifying a larger number of targets is to account for the fact that many will not be ready or willing to sell at this time.
Evans' role in pipeline building
Evans provides the commercial research and target intelligence to build and maintain this funnel. We are not brokers or investment bankers; we do not sell businesses or provide transaction advice. We help you find the companies that fit your growth strategy so you can build a credible, research-led pipeline. Our Acquisition Opportunity Engine is designed to identify these off-market opportunities, while our Build My Acquisition Thesis tool helps you set the filters that define your search.
By starting with a clear thesis and a well-researched longlist, you move away from 'hope-based acquisition' and towards a professional, repeatable growth process.
Considering growth through acquisition?
Acquisition Opportunity Engine identifies and researches businesses that fit your acquisition criteria — on-market listings and potential strategic targets that are not known to be for sale — and helps prioritise where to look first. Commercial research, not transaction advice. From £695 + VAT per month.
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