Most acquisition strategies begin by identifying businesses that meet specific financial criteria. However, many SME acquisition targets file abbreviated or simplified accounts that provide only limited information in the public domain. As a result, conventional screening methods based on turnover, profit or other profit and loss measures can exclude a substantial proportion of businesses before they are ever considered.

This challenge is particularly relevant within the owner-managed business sector, where many companies with turnover below £10 million file reduced financial information. The absence of published turnover or profit figures does not mean a business lacks scale, profitability or strategic value, but it does make acquisition research more difficult when relying solely on traditional financial screening methods.

Why Small Company Accounts Create Challenges

UK company law allows many smaller businesses to file reduced financial information at Companies House. Approximately 70% of firms with turnover below £10 million do so. Whilst this simplifies reporting requirements for SMEs, it limits the amount of information available to acquisition researchers and can make it harder to assess business scale using published accounts alone.

Estimated Turnover Can Improve Market Visibility

One of the challenges in acquisition target search is maintaining visibility across the entire market rather than only the subset of companies that publish complete financial information.

Where turnover is unavailable, estimated turnover models can provide a useful indication of business scale by combining sector benchmarks with other available company information. This is where accurate industry classification becomes particularly important. Whilst SIC codes can provide a broad indication of business activity, they are often too general for meaningful benchmarking. Effective benchmarking depends upon comparing genuinely similar businesses, making accurate market definition essential.

USP Data’s researched industry sector classifications have been developed with this objective in mind. By grouping companies according to their actual business activities rather than broad statistical classifications, more reliable industry averages can be established. These averages can then be used alongside employee numbers and other available indicators to estimate the likely scale of businesses that do not disclose turnover.

The value of this approach increases as sector definitions become more focused. For example, the average sales per employee achieved by specialist scaffolding contractors operating in Scotland may differ significantly from those operating in London. A focused industry grouping can therefore provide a more meaningful estimate than a broad SIC code population containing many different types of construction businesses.

Whilst estimated values should never replace detailed due diligence, they can help acquisition teams identify businesses that merit further investigation and ensure that potentially attractive acquisition opportunities are not excluded at the initial screening stage.

Acquisition Research Requires More Than Published Accounts

The objective of acquisition research is not simply to analyse filed accounts. It is to identify attractive businesses.

The most effective acquisition programmes combine financial information, ownership intelligence, sector research and market mapping to create a broader understanding of potential acquisition opportunities.

By combining published accounts with sector intelligence and ownership information, acquisition teams can develop more complete acquisition universes and improve visibility across the SME market.