Acquisition Pipeline: Definition, Challenges, and Management (2025)

M&A practitioners often haggle over the ideal number of targets for their acquisition pipeline. Research conducted by McKinsey of active acquirers suggests that, to close 10 deals a year, a company must identify roughly 100 candidates, conduct due diligence (link) on around 40, before acquiring 10. These ratios may vary by industry and your company’s experience, but the research is proof of the importance of having an acquisition pipeline. Below, we look at this theory in more detail for M&A practitioners.

H1: Purpose of Acquisition Pipeline

In short, the purpose of an acquisition pipeline is dealmaking that adds long-term value. At the outset, the acquisition pipeline should provide dealmakers with a bird’s-eye view of whether their list of targets aligns with their strategy. For example, if the list indicates that there are companies of different sizes, industry segments, and geographies, they should be asking whether they’ve adopted a scattergun approach to their acquisitions. By providing clarity here, the acquisition pipeline enables the M&A practitioner to focus more on what they want to achieve from deals.

The acquisition pipeline also adds value as a project management tool. In addition to giving some high-level detail on each target, it motivates dealmakers to establish how far they have progressed (or otherwise) on a deal with each. A good acquisition pipeline should clearly show which companies have been contacted, who within the company was contacts, along with a summary of that initial contact. It should also provide information on how far due diligence has progressed, and what the next steps for each target is.

H1: Understanding the Acquisition Pipeline

Corporate strategy is the most important part of an acquisition pipeline. It’s not explicitly mentioned on most acquisition pipelines, but it underpins the motives for adding each of the target names to the list. If corporate strategy dictates that your company has a roll-up strategy (link) to generate growth, it makes no sense to list companies of a similar size to your own. Similarly, if the aim is to acquire companies with proprietary technology (IP), every company in the acquisition pipeline should have IP of some form.

The steps involved in creating an acquisition pipeline include:

• Develop criteria: Assuming your corporate strategy has been developed, that should be used to develop criteria for companies on the acquisition pipeline. Examples may include revenue, employee numbers, industry, geography, product and service offering, etc.
• Market research: Good targets don’t usually appear without some groundwork on behalf of the acquirer. For this reason, large companies employ people who work around the clock to research suitable target companies with the chosen criteria.
• Preliminary assessment: As the list grows, you can start to conduct a preliminary analysis of each of the target companies, separating those which are real targets (i.e. those that meet and exceed the acquisition criteria) from those that aren’t.
• Initial contact: Potential targets should be sounded out about their interest in a deal. This information also informs the acquisition pipeline, and the information provided by the target during this contact should be maintained for future reference.
• Due diligence: Assuming that the initial contact went well, and that the target is open to a deal at a valuation within a range which you deem acceptable, due diligence can begin, starting the acquisition process in earnest.

A typical acquisition pipeline should have several headings, enabling anybody with access to quickly gain an understanding of the company’s current acquisition prospects. Typical headings include:

• Target name
• Target industry segment
• Target location
• Target revenue/EBITDA/net income
• Target contact person(s)
• Preliminary valuation range ($m)
• Initial contact made (date)
• Detail of initial contact
• Status of lead (warm/cold)
• Next steps

DealRoom provides an M&A pipeline template for its users here.

H1: Variations for Acquisition Pipeline

The processes and headings involved in the acquisition pipeline outlined in the above section are not set in stone. One of the motives of an acquisition pipeline is to bring focus to a company’s M&A strategy. Use whatever means you have at your disposal to adapt the acquisition pipeline to add to this focus. For example, this is likely to involve different evaluation criteria or additional stages to add before making contact with a target company. Other criteria may include capital structure, key supply chain relationships, or even cultural fit.

H1: Decision Making Points

As more time is invested in the acquisition pipeline and it has been refined - there’s a good chance that not all of the initial criteria you have laid out will be relevant having analyzed the market in detail. Company stakeholders that own the pipeline, such as the corporate development team, can develop additional criteria and considerations that influence decisions at each point - where critical evaluations and commitments are made. This helps them to better understand the factors that determine whether a potential acquisition progresses or not.

Pipeline management software is particularly valuable here, allowing M&A practitioners to create more intuitive acquisition pipelines that act as strategy roadmaps rather than simply a list of companies on an Excel sheet. It’s crucial to think of the pipeline as a strategy tool, rather than a piece of information. A list of companies that meet certain criteria could otherwise easily be developed with a platform like PitchBook or CapitalIQ. The goal here, on the other hand, is to achieve your company’s corporate strategy goals.

H1: The Role of Acquisition Strategy and Planning

An acquisition strategy is the part of a company’s growth strategy, which specifically deals with non-organic growth. Its aim is to identify where opportunities for growth lie in corporate development transactions - typically, mergers and acquisitions. If the acquisition pipeline is one output of the company’s acquisition strategy, then planning is one of its inputs.In a previous DealRoom article, we outlined how to put together an acquisition business plan for those that are considering an M&A transaction, but require a better understanding of where planning fits into the process.

H1: Challenges in the Acquisition Pipeline

There are numerous challenges inherent in maintaining value-generating acquisition pipelinles. These include:

• Identifying sufficient suitable targets: You may find that there aren’t many companies that fit your deal criteria, rendering the acquisition pipeline near impossible to execute.

• Mitigating Action: Understand which of the criteria is making the list so hard to construct (e.g. proprietary technology tends to reduce a lot of industries to just a few companies), and decide whether these are key. Don’t over-compromise if the criteria are key to your company’s acquisition strategy.

• Identifying too many targets: On the other side, it’s also possible to identify too many targets, taking up thee corporate development team’s resources in putting together an exhaustive list of potential targets.

• Mitigating Action: In this case, it may be useful to regroup and decide on extra criteria for adding companies to the list. Decide first which criteria are flexible and which aren’t. Consider that there are literally millions of companies with revenue under $10 million, but the numbers diminish quite rapidly above this threshold.

• Lack of Focus: Some companies may find their way onto the acquisition pipeline because they’re ‘close enough’ to the criteria, thereby creating a less focused list of companies, that are more or less attractive targets.

• Mitigating Action: This is why setting and continuously re-evaluating acquisition criteria is so important. Similarly, when too many targets are entering the list and being discarded, there’s likely to be something wrong with the initial evaluation criteria for companies.

• Lack of Detail or Accuracy: Detail and accuracy are important on the acquisition pipeline. If information has been obtained on a company, either through desk research or  i needs to be referenced accurately.

• Mitigating Action: This isn’t always easy with a traditional spreadsheet, so it’s important that acquisition pipeline software is used to ensure that you have full visibility over where you are in the process with each target company.

H1: Tools Used for Acquisition Pipeline

As the acquisition pipeline grows, and more companies are contacted, companies typically find the process becoming far more than just maintaining  the list itself. For those, that use several tools, this can become unwieldy. A typical set of tools used for the acquisition pipeline might include:

• Spreadsheets: Usually used for the acquisition pipeline itself as well as the valuations of individual companies, and other pieces of information shared.
• CRM systems: Companies with pre-existing CRM systems may use them as part of their acquisition planning process. For several reasons, this is far from ideal but is common.
• Project Management Tools: Trello, initially conceived for Kaizen, is often used for the companies’ acquisition pipelines.
• Communication Tools: Communicating feedback to different team members may be left as a note within the spreadsheet, or can be relayed via email or videoconference.
• Data Rooms: Tying all of the above together is a corporate development team data room, where everybody can access (and contribute to) the acquisition pipeline.

This is a dizzying range of tools for a process whose success is underpinned by focus. There are so many pieces of vital information that can fall between the cracks by using a suite of tools like this that maintaining an acquisition pipeline almost becomes more effort than it is worth.

H1: Benefits of Acquisition Pipeline Management Software

Despite strong evidence that it’s a losing game, we estimate that over 90% of active dealmakers are still using Excel or Google Sheets for their acquisition pipelines. This reduces an important weapon in the company’s arsenal to little more than a list. And maybe not even an effective one. If you’re paying your corporate development team to develop lists, ponder whether it’s an effective use of resources.

With an Acquisition Pipleine Management tool like DealRoom, you can capture and manage all opportunities in one place. It provides users with a collaboration tool that’s not just about storing data, but making data work for you. Each company can be linked to its relevant emails, documents, and information, giving you a visible and comprehensive framework in which to analyze the pipeline. This level of automation means you never miss a relevant opportunity again.

H1: Conclusion

A deal pipeline is an essential tool for companies which are serious about M&A. It builds on the acquisition strategy to bring focus to the process. By not using an effective acquisition pipeline management tool, there is a danger that this focus will be diminished. This is one of the key pieces of feedback provided to DealRoom by active dealmakers that led it to developing its own acquisition pipeline management tool, which you should consider making part of your own company’s corporate development team’s arsenal.