M&A Sell-Side Transactions: A Roadmap for Researching and Identifying Likely Acquirers

  • Posted February 14, 2023 by

When I launched Private Equity Info in 2005, I sought to provide the Investment banking industry with a solution to generate targeted buyer lists for their clients' companies quickly. But, of course, the key word is "targeted."

As an Investment Banker, I knew there was a better way to manage an M&A process and to identify the best opportunities from the thousands of potential acquirers.

Today Privateequityinfo.com is a recognized source for the data and the research tools to quickly and easily identify the most likely buyers for a company, allowing investment bankers to spend less time on research and more time building industry relationships and closing deals.

Our years of experience and direct work with hundreds of investment banking firms, sell-side deal origination teams, and business development professionals provide us unique insight into the best practices for researching and identifying potential acquirers essential for successful M&A transactions.  We use this insight to continue to enhance our services and to provide support to our M&A Clients.

This post provides an overview of what we see as a model process for identifying Strategic and Financial Buyers for successful M&A Sell-Side transactions.

To begin the deal origination process, savvy investment bankers group potential buyers into three categories: A-List, B-List, and C-List.

A-List acquirers are firms that have expressed interest in the client's industry and have made at least one investment in that space.

The best gauge of a private equity firm's appetite for a specific industry is that the PE firm has already made a similar investment.

This is why Private Equity Info tracks private equity portfolio companies. It allows investment bankers to quickly find private equity firms with portfolio investments that look much like their client's company.

A-list acquirers also include private equity firms with portfolio holdings in tangential industries – related industries with a readily identifiable and compelling strategic rationale to the client company.

It would be normal only to have a dozen or so firms on the A-List, fewer for niche industries.

B-List acquirers are those firms that may not have previously invested in the same industry. Still, they have a strong stated interest in the industry or related space, AND the client fits within the PE firm's general acquisition criteria (industry, size, geography… in that order).

Private Equity Info provides easy methods to filter PE firms by these metrics quickly.

Including 15-30 private equity firms for the B-List would be expected.

Again, the key is to be targeted.

Note: It is not a good practice for investment bankers to blast every deal to a broad swath of private equity firms, regardless of fit for the recipient. Private equity executives (the recipients of these off-the-mark emails) quickly surmise that bankers waste their time with email blasts. These bankers quickly move to the "I don't open emails from that guy" list. We know this because the private equity professionals tell us. They name names.

Investment bankers looking to build reputable firms for the long game should strive to develop a reputation in the market as the type of professional that does their homework and only sends deals to the PE firms specifically related to the private equity investors' acquisition criteria.

C-List acquirers include a sampling of PE firms where the client company fits within the desired transaction size, often within a reasonable geographic proximity.

For high-quality clients, investment bankers usually do not have a C-List. Frankly, bankers hope they do not need a C-list.

Narrowing the M&A sell-side process only to include high probability buyers.

  • Results in a more efficient M&A deal process
  • Increases the probability of a successful transaction.

That is, the investment banker gets paid a success fee.

FINDING THE EXACT EXECUTIVE

A key component to building a buyer list is identifying the best private equity firms to contact and selecting the single best contact within these firms – the person most likely to express interest in the deal.

This should resonate with most investment bankers

If you contact the wrong person at the right firm, you will often get the wrong answer. Or, more likely, no response.

In theory, inbound opportunities would circulate from the initial recipient to the best recipient within a private equity firm. However, in practice, this is often not how it works.

For this reason, it's critical to determine the single best contact at each private equity firm to reach out to for a specific deal.

(NOTE – sending the same deal information to everyone at the same firm is not a good practice. Bankers who do this several times also land in the "move to deleted items" filter.)

To make the M&A research process even more efficient, Private Equity Info identifies the exact right person at each PE firm through our Exact Executive tool.

The Exact Executive is typically the person at the private equity firm that holds the Board seat to the specific portfolio company of interest (the portfolio company that looks like the banker's client company). With this enriched PE executive data, the investment banker connects to the right person, at the right firm, about the right deal, at the right time.

AUTOMATE M&A RESEARCH - Auto-Search

Because Private Equity Info strives to produce high-quality data and tools that streamline the deal process, we've also created a tool that automates M&A research.

Enter a website, and our Auto-Search tool visits the website in real time and understands the various products and services offered. From this, Auto-Search produces a list of potential buyers for that company, grouped into three categories:

  • private equity firms with relevant portfolio holdings (the A-list from above)
  • private companies (strategic acquirers)
  • publicly traded companies that operate in the same industry.

Auto-Search compresses eight hours of research into just a few minutes by mimicking the process steps a research analyst would navigate to produce the same list.

Results from Auto-Search may be downloaded as an Excel file – a single file with three tabs corresponding to the three buyer types (PE Firms, Private Companies, Public Companies).

Further, the Exact Executive tool is integrated into Auto-Search. Consequently, the download file not only produces matching PE-owned portfolio companies and the right PE firm to contact, but it also shows the Exact Executive to contact at each private equity firm, contextual with the portfolio company of interest.

Investment bankers find Auto-Search hugely advantageous for initial client pitches, when the banker would rather not allocate eight hours of research for a potential client. In this scenario, bankers can get smart quickly and learn which PE firms and strategic acquirers might be interested in the potential client's company. In addition, it's a quick vibe check for the level of buyer interest expected for a potential client with very little time invested.