In M&A, your addressable market and your ability to execute within that market will be the difference maker to achieve a successful transaction. Buyers will work to understand the size of the market that your business and product are in. This will have a direct relationship to enterprise value, as well as a potential buyer’s interest in investing or acquiring your business.
If buyers cannot get comfortable with the Total Addressable Market (TAM) that your business is serving, they’ll probably struggle with a rationale to acquire your business. Understanding the size of the market is fundamental in M&A and a key consideration in how a buyer or investor will develop a thesis to acquire your business or the shares of your company. You’ll need to be able to characterize your market size. Not only is the primary market that you serve critical to a buyer, but your ability to move into other markets must also be considered. Whether a buyer can expand your TAM oftentimes determines if a buyer will acquire or invest in your business.
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