An investor can find a long list of businesses in a sector and still not know whether there are enough independent companies to support an acquisition strategy. The list may count locations, brands, and subsidiaries as separate targets. It may also mix companies that serve different customers or geographies. The first job is to make the count reflect the businesses a buyer could actually pursue.

Start with the buyer's market

Define what the fund wants to buy. A market might mean commercial HVAC service in a few states, for example, rather than every business connected to building systems. Decide which services are in scope, who pays for them, and where a company can realistically deliver them. Then apply the fund's actual size, geography, and ownership criteria.

That boundary matters. A national industry category can look large while the part that fits a fund's target size or geography is thin. An industry code can help find data, but it is only a starting point. Read what each company actually does and who its customers are before treating it as comparable to the others.

Count companies, not addresses

County Business Patterns is useful for an initial geography and industry screen. The Census Bureau says the data report establishments, employment, and payroll by geographic area, industry, and establishment size. Its glossary defines an establishment as one physical location and notes that a company can include more than one establishment under common ownership or control. See the County Business Patterns datasets and glossary.

That distinction changes how a buyer should read a count. Two addresses may belong to the same company. Several local names may sit under one parent. An establishment count shows where businesses operate; by itself, it does not show how many separate ownership groups could be acquisition targets. Use the data to guide the next research step, not as the final target count.

Check who owns the names on the list

For each company, look for the parent and operating names behind the record. Compare its official website, locations, public business filings, and any ownership information the company has published. A listing site or a separate brand name is not enough to establish that a business is independent. If the evidence conflicts, mark ownership as unclear and leave it for follow-up instead of guessing.

Franchise networks need their own check. A local location may have a separate owner, but the brand, customer relationships, or operating rights may be governed by a larger system. The buyer needs to understand what is actually owned and transferable before treating each location as a separate acquisition path.

Ask whether the target set can work together

A long list alone does not make an acquisition strategy. The companies still need to fit the same buyer's plan. Do their services overlap enough to share recruiting, purchasing, dispatch, or sales? Do they serve similar customers in a geography where a larger platform would be more useful? Are they large enough to meet the fund's criteria, either on their own or as add-ons to a platform?

Similar companies do not automatically make a good group. If they serve different customers, operate far apart, or depend on different capabilities, combining them may not work as planned. The buyer should be able to explain why each type of target belongs before counting it toward the opportunity.

Test a small sample before sizing the market

Pick a manageable group of companies and record four things: the main service, the customer type, the area served, and the known owner or parent. Keep the source for each finding. Remove duplicate locations, separate businesses that only look similar by industry label, and keep uncertain ownership in its own category. This quick pass shows whether the original list is holding together or needs a narrower definition.

Then estimate the number of likely independent companies that remain inside the fund's actual buy box. Keep that separate from the number of businesses that may be available for sale. Public business data can help identify where companies operate, but it does not tell a buyer whether an owner is willing to sell.

What the count should tell a buyer

After the market is defined, duplicate ownership is removed, and the companies are checked against the buyer's criteria, the team can make a more useful call: whether enough plausible targets remain to justify more research. If the count falls sharply, that is useful information. The thesis may need a tighter service definition, a different geography, or more evidence before the team invests further time.

Calling an industry fragmented is only a starting point. A useful market thesis explains which companies the buyer would pursue and why those companies could work together.

Sources

U. S. Census Bureau, County Business Patterns datasets and County Business Patterns glossary.