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Private Equity Industry Segment Tests
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If you want to be a private equity advisor there are certain criteria and experiences you have to have. Being in the c-suite of a company is the first criteria. Having done that for a company that had 100 million dollars in gross income is the second. Identifying a specific industry segment to target is you first duty as a private equity advisor. I have over 20 successful years as a senior leader and entrepreneur with multiple mergers and acquisitions. I have learned that there is a few industry segment tests that can help you define your segment. Below is a narrative that will discuss these tests.

It had been a week since I had spoken with Mickey, Larry, and Wayne. They were all executives for minor league sports teams. I had tasked them with identifying industry segments as potential target candidates. The three of them were discussing their progress as I approached the table.

"Hey, guys, Mickey, Larry, and Wayne," I nodded to each as I said their name. "How's it going with your lists?"

Their faces contorted. "Not so good," said Larry. "It wasn't as easy as I would have thought. I still only have one company on my list."

"ProAllStars?" Wayne asked.

Larry's face turned a brilliant red. He clinched his lips and said nothing.

"You may have to adjust your criteria to get it larger or smaller," I said. "There are three tests I like to use to help me define my target business segment."

"That would be helpful," said Mickey.

"The first test is whether or not you can easily determine if any potential target fits into the definition. If not, further clarification is needed."

They all had brought notepads to this meeting and scribbled down what I said.

"The second test I use is to ask myself if the definition encompasses fewer than five potential targets. If so, I consider broadening my definition."

Again, all remained quiet and wrote.

"The last one," I said is sort of the opposite of that. It is to ask if your definition of a business segment encompasses more than 50 companies. If that's the case narrow your scope."

They all wrote again. Larry spoke. "That is sort of general, but it does help clarify how-to-identify-a-business-segment-to-buy-as-a-private-equity-advisor."

Wayne nodded. "I think I was trying to make it all too difficult," he said. "It's not rocket science."

"No, it's not," I agreed. "And it is not as easy as running a professional sports team, either," I laughed.

Their eyes darted around the table before they felt comfortable enough to chuckle.

"So, do the tests help?"

"Yes," said Mickey. "First can you identify if any potential target meets the criteria."

I nodded.

"Second," said Larry, "your definition should have at least five potential targets, if not broaden your scope."

I nodded again.

"Finally," said Wayne, "If you definition had more than 50 potential targets, then tighten your scope.'

"Yes, on all accounts," I said. "Do you have any questions, or did this help?"

"It helped," said Mickey. The two others nodded.

"Okay," I said, "then I will see you in a week and hopefully we will have a list of potential targets to begin a-private-equity-initial-contact-checklist."

"Good," came back in chorus.

I nodded and left.

Thanks for reading.


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  about 1 decade ago
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