Which Industries Are Suited for Business Acquisitions? A Strategic Analysis

Fragmentation:
Attractive industries are often fragmented – meaning they consist of many small and medium-sized businesses with no dominant market leaders. This creates room for growth through acquisitions (buy-and-build), offers competitive advantages, and enables a stronger negotiating position with both customers and suppliers.

Growth:
Industries with stable or above-average growth rates offer security and expansion potential. Historical and projected market data are essential for any assessment and should be considered alongside the motivations behind a business acquisition.

Regulation:
A certain degree of regulation can be advantageous, as it creates barriers to entry and protects established providers. Excessive regulation, on the other hand, can stifle innovation and flexibility, or lead to high compliance costs. A careful analysis of the regulatory framework is therefore essential.

Price levels:
Business valuations vary considerably across industries. Sectors with high demand and low fragmentation (e.g. software, healthcare) often command higher multiples. Less sought-after or cyclical industries, on the other hand, offer more attractive entry opportunities, but may carry higher risks. In this context, it is helpful to consistently align business valuation when acquiring a company with the specific industry in question.

Many buyers are dazzled by trending topics such as FinTech, artificial intelligence, or e-commerce. While these markets promise high growth rates, they are frequently overvalued, dominated by major players, and characterised by intense competition. The risks are clear: inflated entry prices, short market cycles, and limited opportunities for sustainable differentiation.

Another common mistake is confusing personal interest or enthusiasm for a particular topic with an objectively viable business opportunity. Those who allow their own preferences to guide them too strongly risk overlooking critical factors such as market potential, the competitive landscape, and sound business fundamentals. A professional analysis and a clear separation between personal passion and commercial reasoning are therefore essential to avoid poor decisions and secure lasting business success.

Industry fit is not merely a question of numbers and trends — it depends significantly on personal experience, networks, and individual passion. Long-term entrepreneurial success only materialises when the entrepreneur genuinely identifies with the industry, understands the business in depth, and is able to create real added value.

Alongside analysing market attractiveness and personal competencies, it is essential to engage with the "Action" dimension – that is, the question: What do I actually want to do in my day-to-day entrepreneurial life? The "Attitude, Aptitude, Action" concept from the Buy-Then-Build framework emphasises that sustainable success depends not only on the right mindset and the right skills, but also on whether the daily tasks and responsibilities align with your own preferences and strengths. Finding an industry exciting is not enough – you must also be willing and motivated to take on the specific tasks, challenges, and routines of that business model, day in and day out. This includes having clarity about your search strategy and market approach, as well as a realistic understanding of the costs involved in acquiring a business, which can vary considerably across different industries.

Reflect not only on which industries you know or which networks you can bring to the table, but also:

• What activities do I actually want to carry out on a day-to-day basis?
• Which tasks motivate me in the long term – even during difficult phases?
• In which environment can I fully develop my strengths?
• Does the corporate culture of the industry align with my values and leadership style?

An honest, holistic assessment of market attractiveness, personal fit, and the readiness to take consistent daily action is the key to sustainable entrepreneurial success.

Choosing the right industry is the first and most important filter in the acquisition process. Those who carefully analyse fragmentation, growth, regulation, and pricing levels, avoid hype-driven markets, and do not overlook personal fit, lay the foundation for lasting success. Once an attractive industry has been identified, the next step is evaluating individual candidates – more on this in "What makes a good target company". The chosen industry should always be aligned with your investment thesis. IoE supports you at every step of the journey towards a successful business acquisition.

You can find a complete overview of all steps in our business acquisition checklist.