A prioritize list of our top 5 industry criteria and top 5 company criteria After an engaging group discussion, we arrived to the following list of our top 5 criteria for both choosing an industry and a company. We also weighted the criteria (total 100 points) against the importance in the final decision and used it in choosing our target industry later. Industry – High number of targeted companies: (20) As explained in the case, searching for a company to acquire can be a “number game.
Even if the Industry Is attractive, we cannot complete the deal without ample numbers of targeted company. Thus, we can mitigate risk of not finding a suitable company to acquire. Growing: (30) By choosing industries, which are growing, we can Increase the possibility to have an attractive return. – Sizable in terms of revenue: (15) If industries are sizable, there will be more chance to have companies that will fit to our financial criteria.
What’s more, even If a niche market within the Industry itself will still be big enough to be attractive. Straightforward operation: (10) As a search found, it is clear that the easier the Industry operation, the easier to scale the learning curve quickly and to find out essential point of the business for growth and profit Improvement. Personal interest and familiarity: (25) If we have personal interest and familiarity for the industry, we can learn the business quickly and make the great start Immediately after becoming CEO.
Company – Healthy financial performance (EBITDA, evaluation, revenue, profit): (20) Robust margin for error and sufficient profits for the CEO to Invest In growth or recruit experienced manager will increase the probability to operate successful businesses. – Solid middle management: (25) As we are Inexperienced CEO, we feel more pressure if there are no reliable management team. Also, to hire layer of middle management lead to reducing profits.
Also, when we think of transition process, an I OFF – Multiple growth potential: (20) If the company has multiple growth avenues, it means that there are a lot of chances to increase the financial situation of the company, which is quite favorable. – Competitive advantage: (25) Without competitive advantage, it is difficult to narrate healthy and sustainable profit margin. – Realistic liquidity options in 3-6 years: (10) It is obvious that final goal off searcher is to exit the business.
Thus, if we had clear vision to exit, it would be the perfect situation. 2. Choosing the Food Industry Using our choosing criteria and brainstorming about interesting industries, we believe that food industry will fit to our industry criteria the best. Here, we weighted each criteria and compared some industries based on the relative number for each criteria. Then, we found that the score for food industry is the highest of all industries. One more important thing when we choose one industry is that we picked from traditional industries.
It is obvious that there are many industries which are growing at a surprising pace, but as a searcher we have to find a company of which owner is thinking about their business succession. We do not think that owners of fast growing industries such as game development and e-commerce industries are thinking about their succession. Following is the simply illustration of our choosing process, using tourism industry as a reference: Best Fit Criteria
High number of targeted companies Sizable in terms of revenue Personal interest and familiarity 3. Reason for Willingness to Compromise industries we compared it to, it is still a positive growth rate of 3% and it is a very stable and encyclical industry. Therefore we have reason to believe that the industry is still attractive as a whole. Furthermore, we think if 3% is the average then certain sub segment must be growing after than 3% that we can identify, such as organic food etc. Straightforward operation: Food industry covers a board range of businesses and loud involve diversified and complicated operations: from fresh/semi-fresh/ready- made raw material sourcing to production to distribution etc. But we believe that for the following reason we could accept this as a disadvantage: 1 . Food is still a concept easier to understand compared to other more technical driven industries. 2. The long existence of the industry will give us plenty of information and best practice or example to learn from. Therefore even though complicated processes might be involved, we can still learn fast.
