How do you qualify an acquisition target?

A list of businesses that match your sector, size and location is useful. It is not a pipeline. Most buyers who have tried to work through a target list know the problem: dozens of names, not enough time, and no clear way to tell which conversations deserve attention.

Qualifying a target is how you sort that out. It means gathering enough evidence to decide whether a business is worth your time, and being honest about how good that evidence is.

What are the stages from a name on a list to a real opportunity?

It helps to use four clear stages, so everyone means the same thing when they say a target is "qualified".

Each stage narrows the list. Plenty of good businesses stop at the second or third stage because the owner is not interested or the timing is wrong. That is normal, and it is why you need to start with a wide enough list.

Does the business fit what you want to buy?

Start with what you want to buy and why (your acquisition thesis). Then check each business against it:

• Strategy: does it add customers, services, capability or geography you actually want? Can you say in one sentence why you would own it?
• Scale: is it big enough to matter and small enough to manage and fund? A business half your size is a very different project from one a tenth of your size.
• Geography: can you run it from where you are, and do the customer bases overlap in a useful way?
• Ownership: who owns it, how many shareholders are there, and is the founder still running it? The register of people with significant control shows anyone holding more than 25% of shares or voting rights.
• Exclusions: the things you will not buy, decided in advance. For example, heavy dependence on one customer, a business model you do not understand, or a regulatory history you could not live with.

Writing exclusions down before you look at any businesses is one of the simplest ways to stay objective when an exciting opportunity appears.

What can filed accounts tell you, and what can't they?

Companies House filings are the first financial check, and they are free. Look at:

• Net assets and how they have moved over several years.
• Cash and borrowing on the balance sheet.
• Charges registered against the company, which show who has lent against it.
• Whether accounts and confirmation statements are filed on time.
• Turnover and profit, where they are published.

Know the limits. Under current rules, small companies (broadly, meeting two of: turnover up to £15m, balance sheet up to £7.5m, 50 or fewer employees) do not have to file a profit and loss account, so many owner-managed businesses show no turnover or profit at all. GOV.UK guidance says this changes from 1 April 2028, when small companies and micro-entities must deliver a profit and loss account, though they can opt out of having it published. Many small companies are also exempt from audit, so their accounts have not been independently checked. And filed accounts can be well over a year old by the time you read them.

So filed accounts tell you whether a business is broadly the right shape and whether anything looks wrong. They do not tell you what it earns today or what it is worth. That comes later, from the owner's figures and from checking what you're really buying.

How do you find out if the owner wants to sell?

You ask, carefully. The first conversation with an owner is about listening, not negotiating. Aim to understand:

• Interest: are they open to a confidential conversation about the future of the business?
• Motivation: retirement, health, a partner leaving, fatigue, wanting to see the business grow under new ownership, or simply curiosity about what it is worth.
• Timing: now, in a year, or "at some point"?
• What matters to them: their staff, their customers, their name staying on the door, staying involved for a while.

Record what they said, in their words where you can, and do not stretch it. An owner who says "I'd listen" has not agreed to sell. Owner age or length of service is not evidence of sale intent either. Our guide on how to approach a business owner covers the first contact itself.

Which red flags should stop or slow you down?

None of these is automatically fatal, but each needs an answer before you go further:

• Accounts filed late, or a history of late filing.
• Falling net assets over several years, or growing borrowing with no clear reason.
• Several charges registered against the company, or recent new lenders.
• A large share of income from one customer or one contract.
• The business depends heavily on the owner's personal relationships, with no one ready to take them on.
• Recent departures of senior staff, or a tangle of shareholders who may not agree.
• Figures from the owner that do not match the filed accounts, without a clear explanation.
• Pressure to move quickly, before you have had a chance to check anything.

How do you tell facts from estimates?

This is where most target records go wrong. A figure sounds just as solid whether it came from audited accounts, a data provider's estimate or a comment over coffee. Label every important fact with where it came from and when:

• Verified: taken from a primary source you have seen, such as filed accounts or the Companies House register, with the date.
• Estimated: worked out by you or a data provider, for example turnover estimated from headcount. Say how.
• Seller-reported: what the owner told you. Useful, but not checked. Never describe it as verified.

Here is an illustrative, fictional record showing how that looks in practice.

Anyone reading this record knows what has been checked and what still needs to be.

A simple qualification checklist

An "unknown" is fine at this stage. What matters is that you can see it.

Why keep records of businesses that didn't qualify?

Unsuitable and unresponsive businesses are still useful information. They show whether your criteria are realistic, which parts of the market are closed for now and which owners might be ready in a year or two. A business that is wrong today can be right after a change of circumstances, and a clear record means you can return to it properly rather than starting again. Keeping several qualified conversations side by side is also what lets you compare opportunities and walk away from the weaker ones.

Getting to qualified introductions

Qualifying targets well takes time that most owners running a business do not have. In Acquisitiv Target 45 we research 100 businesses that fit your criteria, agree the list with you, approach the owners in confidence and make five introductions to owners open to a confidential conversation about a sale. If we are short at day 45, we keep going at no extra fee. It does not promise a completed deal, but it gives you real choices to work from.