Approaches for creating an initial list of industries of interest?

January 11, 2019

by a searcher from Denison University in Boston, MA, USA

Hello everyone! I am trying to write down an initial list of industries of interest###-###-#### for further qualitative scoring and want to make sure that nothing falls off my radar, Would you mind sharing your approaches or tools that helped you in this task? In other words, how do you make sure that you covered as many sectors as possible?

I am looking for something more effective than just going through the NAICS codes, which are way too narrow.

Thanks!

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Reply by a searcher
from Michigan State University in St. Louis, MO, USA

Focus on industries where businesses trade at lower multiples, where there are non-obsolete assets which may be collateralized, and where seller paper is customary, for an overall lower cost of capital. You can call banks and business brokers to find them. Pursue what you are passionate about, but approach high multiple, asset-light, unstructureable markets with care. This is also a good primer: https://digitalcommons.pepperdine.edu/gsbm_pcm_pcmr/11/

Reply by a searcher
in Loudon, NH, USA

I'd start with your skill set, what types of companies could you see yourself operating and growing successfully? I'd take in to the typical search criteria of high recurring revenue, slow growth industry, fragmented, high barrier to entry. I'd also do some research for what industries have above average growth. And given the potential for an economic slow down in the coming years, I'd look at industries that are likely to hold up better to a slow down than others. I think your personal skill set, interests and appetite for risk will help you narrow your focus.

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