How to Build an Acquisition Pipeline

Acquisition is often treated as a project—a one-off event that happens when a particular opportunity arises. However, for companies that are serious about growth, acquisition should be treated as a process. Just as you have a sales pipeline to manage new business, you need an acquisition pipeline to manage potential targets.

A well-managed acquisition pipeline ensures that you are never desperate for a deal. It gives you the luxury of choice, allowing you to walk away from overpriced or poorly-fitting targets because you know there are others behind them. This article sets out the framework for building and maintaining a repeatable acquisition pipeline.

The anatomy of an acquisition pipeline

An acquisition pipeline is not just a list of names; it is a structured flow of information. It tracks a target from the moment it is identified to the point where a deal is either closed or the target is discarded. A typical pipeline has several stages:

1. 01Target Identification (The Long List): Broadly identifying companies that might fit your criteria.
2. 02Initial Qualification: Narrowing the long list down based on basic metrics like turnover, location, and core activity.
3. 03Deep Research (The Short List): Collecting detailed information on the most promising targets, including ownership, estimated financial health, and strategic alignment.
4. 04First Contact: Making initial, discreet outreach to the owners or their representatives.
5. 05Relationship Building: Ongoing dialogue with off-market targets to explore future alignment.
6. 06Evaluation and Offer: Moving into formal discussions, valuation, and non-binding offers (Heads of Terms).
7. 07Due Diligence and Closing: The final transactional phase managed by legal and financial professionals.

Stage 1: Defining your acquisition criteria

A pipeline is only as good as what goes into it. If your criteria are too broad, you will be overwhelmed with low-quality data. If they are too narrow, your pipeline will be empty. You need to define your 'sweet spot' across four dimensions:

• Strategic Intent: Why are you buying? (e.g., to gain a specific technology, enter a new region, or consolidate a fragmented market).
• Financial Range: What size of business can you credibly acquire and integrate? (e.g., turnover between £2m and £10m).
• Sector and Geography: Where does the target operate? (e.g., UK-based manufacturing companies in the aerospace sector).
• Operational Profile: What kind of management structure are you looking for? (e.g., owner-managed businesses with a strong second-tier management team).

Evans offers a free 'Build My Acquisition Thesis' tool to help you define these criteria before you start building your pipeline.

Stage 2: Sourcing and research

Once you know what you are looking for, you need to fill the top of the pipeline. This involves both on-market monitoring and off-market research.

On-market sourcing is about building relationships with brokers and monitoring portals. Off-market sourcing is about mapping the market and identifying 'potential strategic targets' that are not for sale. This research-heavy phase is where many businesses struggle to find the time. Using a service like the Acquisition Opportunity Engine (AOE) can help by providing a steady stream of research-backed targets that fit your criteria, allowing you to focus on the next stages of the pipeline.

Stage 3: Qualification and Prioritisation

Not every target in the pipeline deserves equal attention. You need a system for prioritising them. A simple 'Traffic Light' system can work well:

Stage 4: Managing engagement

For off-market targets, the pipeline is often a long-term game. You may identify a target today that won't be ready to sell for three years. Managing this engagement requires discipline. You should keep a record of all interactions, notes on the owner's plans, and any 'signals' you pick up (such as new appointments or changes in the company's financial filings).

It is vital to remember that identifying a company as a target does not mean it is for sale. Off-market companies are 'potential strategic targets,' and your engagement should be respectful and professional. Signals of interest are never proof of a willingness to sell.

The Evans role in your pipeline

Evans helps business owners build and maintain the 'research' and 'sourcing' parts of the acquisition pipeline. We provide the target intelligence that keeps the top of the pipeline full of qualified opportunities.

Keeping the pipeline healthy

An acquisition pipeline can quickly become a graveyard of old information if it isn't maintained. To keep it healthy:

• Review monthly: Set aside time every month to review the pipeline and update the status of each target.
• Be ruthless: If a target no longer fits your criteria, remove it. A clean pipeline is better than a cluttered one.
• Update your data: Financial performance and ownership can change. Ensure your 'intelligence' on each target is no more than six months old.
• Vary your sources: Don't rely on a single broker or a single research tool. Use multiple channels to find targets.

Conclusion

Building an acquisition pipeline is the difference between an opportunistic purchase and a deliberate growth strategy. By treating acquisition as a repeatable commercial process—with clear criteria, systematic sourcing, and disciplined management—you can take control of your company's future and build a business that is greater than the sum of its parts.