How can PE firms compete when sourcing deals in their target markets?
With an estimated 4,000 buyers looking to acquire all types of companies, there is fierce competition in the market today. One of the first things a buyer can do to increase exclusive and targeted deals is to have powerful reasons for looking at a particular company or industry, and to share those reasons with various deal sources.
Second, a buyer can bypass a competitive auction by having their own program of contacting targeted companies and presenting their reasons to owners before they pursue selling. These reasons must be presented so they resonate with owners as being both legitimate and compelling so that sellers want to learn more about the buyer and the opportunity.
However, a successful program typically requires time, highly skilled research and marketing assets, and professionals with expert social and deal skills. If your organization doesn’t have these resources to mount a sustained and systematic campaign, then you should consider discussing your criteria and goals with a buyside adviser that is set up to perform exclusive deal sourcing campaigns.
How has the role of buy-side advisers evolved?
As the demand for exclusive, targeted and non-auction deal flow has grown, so too has the role of the buy-side adviser. Advisers today have expanded beyond simply generating one-off leads to systematically prospecting a targeted industry in order to generate proprietary deal flow.
Once potential targets are identified, the buy-side adviser’s process and expertise for contacting, establishing chemistry and facilitating deals are key in helping to start and move a deal forward. If both buyer and seller are well-informed about transactions, the adviser’s role may focus primarily on facilitating the flow of information, arranging calls and meetings, and acting as a sounding board for both sides in the exchange between a buyer’s probing questions and an owner’s sensitive answers. However, in circumstances where the seller lacks selling experience, the buy-side adviser often becomes a counselor to the seller, who may require advice on a number of different diligence items and personal issues.
Jay M. Aidikoff
Title: Managing Director
Company: The Valufinder Group, Inc.
Location: New York City
Expertise: Jay Aidikoff is the founder of The Valufinder Group, a buy-side investment banking organization focusing on the middle market. Over the course of their careers, Valufinder’s key players have completed more than 350 transactions representing over $8 billion in transaction value.
A good buy-side adviser has deep experience in dealing with the issues, questions and concerns common to many novice sellers and can reduce the sellers’ anxiety by providing appropriate answers to common questions. A modern adviser will regularly act as the deal’s ombudsman by speaking to both sides to ensure that important information is disseminated, misunderstandings are avoided, schedules are kept, and everyone remains focused and positive as they move toward closing.
This article originally appeared in the November/December 2019 issue of Middle Market Growth. Find it in the MMG archive.