Industry screen by Arthur D. Little into a niche market segment delivers 5 proprietary acquisition targets
The client was a start-up private-equity firm seeking proprietary, non-competitive deals in the functional-foods industry, representing foods with healthy ingredients for more nutritional value.
With multiple overlapping segments, the functional-foods industry is not clearly defined and extremely large (over USD 25 billion in the US market alone).
In addition, the industry has been widely approached by private-equity firms, making non-competitive deal flow extremely difficult. Private-equity firms are seeking the next big trend when it comes to health-conscious consumers.
The Arthur D. Little team proposed a three-phase approach, including an industry primer, segment profiles, and target-company profiles.
The team presented the background research and worked with the client to identify segments that were in alignment with its investment characteristics.
In addition, a database of privately held companies was created and filtered by size, segment, and other criteria to create a targeted list of potential acquisition candidates.
The Arthur D. Little team activity included:
- Creation of an industry segmentation structure covering 24 niche areas
- Identification of trends and key success factors for the entire industry
- Creation of a database of over 2,500 privately held companies, with basic financial data
- Segment profiles with market size, key players, growth drivers, trends, risk factors, and overall-attractiveness ratings
- Profiles of over a dozen targeted companies in attractive segments that met acquisition criteria
- Initial phone screening of potential acquisition candidates
By using a structured approach to industry screening, the client was able to identify targeted niche segments and potential acquisition candidates within 5 weeks after engaging the Arthur D. Little team.