The fragmentation stage

The fragmentation stage marks the beginning of an industry’s lifecycle, where many small players compete to establish a foothold. With limited historical benchmarks, businesses strive to stand out and define early leadership. Growth during this phase is often driven by acquisitions—focusing on expanding top-line revenue rather than immediate profitability. The emphasis is on capturing market share quickly to gain visibility and influence as the industry takes shape.

The acquisition stage

As industries progress beyond fragmentation, dominant players begin to emerge—often fueled by increased access to capital and a focused strategy of acquiring competitors. This stage marks a turning point, where consolidation efforts become more deliberate and systematic.

While the industry may still appear fragmented overall, the top companies often control a significant share of the market—sometimes nearing 45%. These leading firms now pursue acquisitions not just to boost revenue but to accelerate growth and achieve scalable efficiencies.

At this point, acquisition targets are typically mid-sized firms—larger than those in the earlier stage—and are selected based on their ability to contribute both revenue and cost-saving opportunities. Success in this phase requires a dual focus: acquiring the right companies and integrating them effectively.

Integration becomes a strategic priority, involving the unification of IT systems, staff training programs, and scalable operational processes. Companies that master both growth and integration in this phase solidify their leadership and set the stage for long-term expansion.

When industries mature

After the expansion phase, industries typically reach a stage of maturity where mergers and acquisitions slow dramatically. Market share becomes concentrated among a few dominant players, and opportunities for further consolidation are minimal.

In this stabilized environment, growth occurs incrementally through internal efficiencies or innovation rather than through deal-making. Industries like automotive and consumer packaged goods (e.g., soft drinks) are prime examples, where only a handful of major firms control the majority of the market.

At this point, entering or exiting the market requires strategic precision and long-term planning.

Implications during an exit strategy

Timing plays a crucial role in any successful exit strategy. Understanding which stage of consolidation your industry is currently in can help you assess what potential buyers value most—and whether they’re likely to pay a premium. With that insight, you’ll be better positioned to decide whether now is the right time to sell or if it’s worth waiting for more favorable conditions as your industry evolves. Strategic timing can significantly impact both valuation and buyer interest.