Competitor Analysis Report When Examining More than One Market
A competitor analysis report is an important part of the due diligence process for investors, along with other considerations like market analysis, firm performance and growth prospects. The competitor analysis becomes trickier when the potential acquisition candidate has distinct businesses in two or more markets.
This was the case for financial firm PFM. The firm had two major lines of business:
- Financial Advisory
- Asset Management
We worked with private equity firm ICV Partners to assess the two distinct market segments.
Primary and Secondary Research Sources
A competitor analysis report for investors usually includes both primary and secondary research. For PFM, secondary information sources included:
- Thomson Reuters
- Standard & Poor’s
- The Bond Buyer
- US Federal Reserve
Primary sources included 112 total customer, prospect and expert interviews. We divided our efforts between the market segments, with 68 interviews in Financial Advisory and 44 in Asset Management.
Complex Competitive Landscape
The Financial Advisory competitive landscape was fragmented. While PFM held the leadership share at 11%, the top 25 firms together only accounted for 50% of industry issues. The next largest competitors by share were:
- First Southwest Corporation (5%)
- Public Resources Advisory Group (5%)
- Kaufman Hall (4%)
- RBC Capital (4%)
- Ponder & Co (3%)
Sector Deep Dive for Competitor Analysis Report
The municipal bond market is made up of 10 prime sectors, including education, general purpose, health care, transportation, utilities, housing, electric power, public facilities, development and environmental facilities. The sectors differ in their size, growth, complexity and profitability. At the time, the largest sectors were education and general purpose, but they were not growing. Top growth sectors were health care, electric power, public utilities and transportation. Each sector also had important subsectors, and competitive positions varied considerably.
The competitor analysis report identified significant upside for PFM in specific health care subsectors, such as acute care hospitals, where Kaufman Hall (26% share), and Ponder & Co. (15% share) had much larger positions than PFM (7% share).
The competitive mix was quite different in transportation, where RBC Capital was the market leader (14% share), followed by PFM (13% share) and First Southwest (10% share). In the water, sewer and gas sub-segment of utilities, PFM was the leader (14% share), followed by First Southwest (7%) and Public Resources Advisory Group (6%).
Regional and State Differences
As might be expected in a market made up of municipalities, there were important differences by state and region for the competitors. The work also examined growth opportunity by state and found particular upside for PFM in six states and specific sectors within those states. So, for instance, Arizona presented specific growth opportunities for PFM in health care, power and utilities.
Competitor Analysis Report for B2B Takes into Account Infrequent Purchase Decisions
When people think of a competitor analysis report, they often think of consumer markets where purchase decisions are made frequently, with seemingly low switching costs, such as fast-moving products or services like beverages, retail or games. In our experience, B2B markets are often quite different, particularly in a category where “purchase” decisions are made infrequently and there are many value-added services that increase switching costs and favor the incumbent. That was the case for municipal bond financial advisory and asset management.
- Many decision makers interviewed inherited the contracts they were in and had always used financial advisors
- The relationships were generally exclusive until they are re-bid
- Rebidding was typically a long process, often resulting in the selection of the incumbent
- Perceived switching costs were high
“I would lose institutional knowledge and familiarity if I switch. This might affect our bond ratings and how we are viewed by the street.”
Developing a competitor analysis report to the appropriate level of insight required using several lenses, and diving deep by sector and municipality. It was important to talk with non- customers and experts, along with current customers. The outcome was favorable. with ICV making the investment in May 2009.
The experts at Insight to Action can help build your competitor analysis report. Contact us today to begin a collaboration.