Most entrepreneurs adopt organic growth strategies (typically market penetration) by default. However, inorganic growth (i.e. mergers and acquisitions) can sometimes be a better option, subject to your ambition, market position, and readiness.
The appeal of inorganic growth is obvious: you can grow more quickly and with more certainty by taking over someone else's business than by trying to replicate the same scope of growth from scratch.
Naturally this is easier said than done. Mergers and acquisitions are usually complex projects, with a high risk of potentially catastrophic consequences if they aren't executed properly.
One of the trends that we've noticed amongst entrepreneurs who attempt this on their own is their tendency to spearfish: they'll approach one or two target companies, typically those where they have pre-existing relationships and insight. This is problematic for several reasons.
The most obvious drawback is that the probability of getting any deal done (let alone a good deal) is fractional when you limit yourself to a tiny pool of potential opportunities.
There is also a high risk of confirmation bias: we're more likely to ignore red flags when dealing with familiar companies, instead of applying healthy skepticism and thorough due diligence.
Finally, your bargaining power is limited when you only have a few options. It's a lot easier to negotiate favourable terms and walk away from unattractive offers when you have a large pool of potential deals.
Our recommendation is simple: fish with a net instead of a spear. It may take more time, but you're much more likely to catch something worthwhile.