Discover how financial data drives successful deals in acquisitions.

TLDR:

• Deal sourcing is challenging, but financial characteristics can help identify acquisition targets.
• Acquisition targets show faster growth, higher leverage, lower liquidity, greater profitability, and larger revenue size.

In a research article titled “Deal Sourcing: A Data Science Approach – Impact of Financial Characteristics on Acquisition Likelihood,” S&P Global Market Intelligence explores how firm financials can be used to systematically identify acquisition targets. The article highlights five key financial dimensions that differentiate targets from non-targets based on global data from the past 10 years.

The key takeaways from the research include:

• Acquisition targets exhibit specific financial characteristics such as faster growth, higher leverage, lower liquidity, greater profitability, and larger revenue size compared to non-targets.
• Firms in the top quintile based on a composite of four financial measures are 5 times more likely to be acquisition targets than firms in the bottom quintile.
• Growth and profitability are universally important factors for identifying acquisition targets.
• European targets show differentiation based on leverage, while APAC targets are differentiated on revenue size.

The research also demonstrates how leveraging computational finance can improve the deal sourcing process and increase the likelihood of identifying potential acquisition targets.