There are more than 4,900 investment banks that provide deal flow to Lower and Middle Market private equity firms.
How do you stay in front of them all, to find the least competitive deals?
For more than a decade, TruSight has helped private equity firms optimize their position in the market by providing intermediary-led deal flow. We recently asked our Buy-Side Deal Origination team, led by Joe Loreto and Zoe Nathan, to share how they stay connected with investment banks.
They had a lot of great ideas for private equity firms: from optimizing online presence, to fostering more meaningful relationships, and exploring innovative sourcing methods. Find the highlights from our conversation below.
Explore new M&A events and dedicate the time
There are several ways to find and meet new investment banks, and industry events are a standard. But with so many to choose from, you can’t attend them all. Focus on the largest, first: like ACG’s signature annual regional conferences. By prioritizing established events, you can maintain those top deal flow channels, and leave flexibility to explore off-the-beaten-path event opportunities, like local M&A chapter events, or a new event that you spot in active M&A LinkedIn groups. One way to better prioritize events is to hire a person specifically dedicated to event strategy, who can evaluate the value of each event, build a meeting plan, and reach out to key banks before arriving.
Regularly update your investment criteria and share broadly
When assessing investment banks, it's crucial to consider the clients they represent. Get a sense of the firm’s history to know if it works with clients that will be a strong fit for your investment criteria. It’s also important to keep your criteria updated and to share it often. If you’ve been working in a new industry, even your closest relationships may not know it. And although your firm may be industry-agnostic, providing specificity regarding the industries where your strongest can help open new conversations. For instance, you might mention that you're currently focused on a particular industry, but always interested in hearing about other opportunities. Establishing a consistent marketing cadence, across content and outreach, can help firms maintain visibility.
More communication and feedback
Investment bankers tell us that it’s not uncommon for private equity firms to be unresponsive. A firm may initially express interest in a deal, obtain material from the banker, and then disengage if the deal isn’t a fit. Feedback can help smooth the edges: it demonstrates a proactive approach and willingness to engage constructively. Without it, a banker might be concerned about the credibility of your fund. This proactive approach indicates a commitment to fostering meaningful connections within the industry and might also lead to other opportunities.
Consider third-party intermediary-led and proprietary sourcing
Perhaps the largest question related to growing deal flow is whether you have the resources to cover the large, lower middle market. Finding actionable but less competitive deals takes considerable effort. Evaluate your team strengths to see if it makes sense to outsource some of your deal sourcing and shift your resources to relationship-building and deal execution.
With TruSight’s Intermediary Coverage service offering, firms receive weekly deals from our 13,000+ investment bank and intermediary contacts, including proactive sell-side criteria marketing. And with our Retained Buy-Side Search service, firms receive a consistant flow of targeted, proprietary acquisition opportunities discovered through outreach directly to private companies.
Build better relationships and grow trust
Many sell-side investment banks operate a structured process, representing their clients by reaching out to a targeted list of 50 to 100 firms and strategic acquirers in the hopes of soliciting multiple high-quality bids from their buyer pool. The question becomes: how can you get on the shortlist to be the first to know?
The most expedient way is to build more meaningful relationships, remind them of your track record of successful investments, and because of the confidentiality of many banker’s processes, establish and nurture trust. Always follow-up with transaction announcements and if an incoming deal isn’t a fit for your firm, consider asking if you can share the deal with your network. Consider setting a reminder to check-in to see how the deal process is coming along: it may lead to a rebound opportunity, especially if the deal hasn’t progressed.
Make your firm’s website more accessible to Investment Bankers
Optimize your website to cater to the needs of investment bankers. Private equity firms and family offices sometimes refrain from disclosing helpful information on their websites, such as the types of investments they're seeking, their target criteria, and portfolio company descriptions. Without this transparency, it's difficult for an investment banker to discern a firm’s strategy or assess potential alignment. Providing clear and accessible contact information for designated business development functions is also helpful.
Don’t judge a bank by its website
Many investment banks don’t have a robust online presence, which might explain why they remain under the radar of many private equity investors. They’re typically small firms with limited resources, and these overlooked players may be just what you’re seeking for less competitive deals. If the bank has limited information on its website and isn’t listing its clients in deal marketplaces, all the better: it probably means that the firm is carefully curating outreach to keep deals confidential.
License better investment bank data
Having up-to-date data is invaluable for private equity firms that are hoping to stay connected with the investment banking community. No matter how strong your network is, bankers change roles, and firms change focus. TruSight relies on subsidiary Private Equity Info to keep our database fresh. The database company’s team of 11 full-time researchers enter and deliver updates on 60,000 investment bank executives at more than 4,900 firms, reviewing a total of 25,000 data points each month – more than 1,600 hours of manual editing. By licensing investment bank data, we don’t have to devote resources to those time-consuming tasks and can instead focus on outreach and relationships.
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