Off-market sourcing: 70% of targets are not in databases

Why databases see only a third of the market

Two mechanisms explain the gap. The first is confidential accounts: nearly 70% of owners do not publish their accounts. A company that does not publish is absent from financial databases, whatever its quality, size or relevance to your project.

The second lies in industry classifications. Codes describe companies as they declared themselves, sometimes twenty years ago. Since then, the business has changed its processes, its customers and its markets. Its code has not moved.

Fig. 1What databases capture. Out of 100 companies actually operating in a market, about 30 appear in transaction databases.

The result is mechanical. A database search, however rigorous, starts from a list missing two thirds of the market. No campaign can make up for an incomplete starting list.

Two blind spots: availability and visibility

The first blind spot is availability. The company can be identified but is not for sale: you can see it, and what remains is to find out whether its owner is open to talks. That is an approach problem, solved through qualification. We cover it in a dedicated article.

The second blind spot, visibility, is much wider. It covers every company your tools do not show. As long as they appear on no list, the question of their availability never even arises.

What a website says that an industry code never will

A company describes its business far more precisely on its own website than in its administrative filing. It details its processes, materials, certifications, references and markets. That vocabulary is public, it is discriminating, and it depends on no database.

Fig. 2What a database sees, what a semantic engine reads. The industry code fits on one line; the company’s website details its processes, materials, certifications, references and markets.

This is the raw material a semantic engine works on. Instead of filtering codes, it reads how companies present themselves and identifies every business whose language matches your thesis, whether or not it publishes its accounts. Coverage then extends to any company with an online presence. The method is detailed in Semantic clusters.

The target profiles only off-market sourcing brings to the surface

Independent companies with confidential accounts: often the best-run and most discreet in their sector.
Group subsidiaries that could be carved out: they never appear as standalone entities in databases.
Companies in difficulty, restructuring or insolvency proceedings: taking them over can create a great deal of value.
Companies whose real know-how does not match their industry code: the most common case in technical trades.

Off-market, the negotiation changes nature

A target identified off-market does not come to you on the same terms as a target under mandate. There is no auction, no imposed timetable, no declared rival: the conversation moves at the owner’s pace. The company is not dressed up by an advisor whose job it is to do so. And a confidential approach does not expose the target to its customers, its employees or its banks.

The trade-off is demanding: absolute discretion and serious qualification beforehand. Approaching an owner without understanding their business closes the door, often for good.

No campaign, however rigorous, can make up for an incomplete starting list.