Driving M&A deal flow through your network

8
Best practices for driving M&A deal flow through your network, including who to target as great sources of deal flow, how to find said targets and how to grow those professional relationships.

Q: I’m working at a Mid-Market M&A Advisory firm in Canada, and I’m looking for ways to bring in deals. Who should I be networking with and what should I say? I’ve thought about approaching commercial bankers, small accounting firms, and lawyers, but I would have no idea what to say to them. Any tips?

I’ll break this down into a couple different components to help address the question:

  1. Who tends to be great sources of M&A deal flow
  2. How you find them
  3. Relationship building (aka, what do I say to them?)

Who

While deals can come from anywhere in your network, below are a few kinds of people who generally are ‘in the flow’ of opportunities:

  • Service providers: As you mentioned in your question, lawyers, accountants, insurance brokers, commercial bankers, and others who work with and advise business owners tend to be aware of events that may drive an owner to sell or take on investment, and typically have their trust. As a result, they tend to know about companies that could be a fit well before that information reaches public channels.
  • Industry experts: Depending on where you and/or your bank is focused, there is likely a network of practitioners + industry experts with a Rolodex of contacts and companies in that area. Getting to know them means they may also refer companies they find interesting — including stakeholders at larger companies that are looking to divest / spin-off divisions of their businesses.
  • Sponsors: These could be existing investors who need to exit due to their fund life requirements (so they can provide liquidity to their LPs), co-investors syndicating a larger deal or investors who come across deals that aren’t a fit for their focus areas but are seeking ways to drive goodwill.

How to find them / identify them

  • Transaction databases: Pitchbook, Datafox, Neptune Financial, and other similar platforms focus on recording what transactions have occurred, and who the participants are. Filtering down to the relevant segments that fit where you’d like to be active likely gives you a strong start on the sponsor front.
  • News sources: Similar to the above, usually sources that cover the specific geographies and industries that are of interest to you, and that may cover sponsors, experts, and service providers worth building a relationship with.
  • Conferences: These can be great ways to identify under the radar service providers, experts, sponsors, and even directly source deals — because they generally self-select for people operating in the areas that match your thesis
  • Industry reports + market research: Industry maps and PDF reports across the web will also help complement the other efforts to find key nodes that are active in the categories you’d like to work in.

Relationship building/strengthening

It’s easy to put a lot of pressure on yourself — but these are relationship-driven industries, where people value knowing others they can potentially work with. Simply indicating that you’d love the chance to connect for coffee or a phone call, given that you operate in similar sectors is likely enough to get an initial conversation scheduled. From there, a few points to drive towards success:

  • Be human: People do business with and seek to help people they like. So avoid making your conversations transactional — learn about their hobbies, family, and their interests. Congratulate them on their promotions, transactions they’ve been a part of — in short, try to be a friend.
  • Be of value: Work to understand what their priorities are, and find ways to help them accomplish those — whether through introductions you can make, information and expertise you can provide, or access to resources and events.
  • Be consistent: Once you’ve had that initial meeting or point of contact, don’t let the relationship die — touch base with them regularly, and continue to look for ways to help them, or to work together.

As your network grows (especially across the team), we tend to find that having some way of organizing and maintaining those relationships can be valuable. A simple spreadsheet or Outlook contacts is a fine place to start — but getting help in remaining consistent with those key relationships, staying abreast of key events in their world, and finding ways to be of value are all areas those systems generally are not equipped to do.

If that ends up being you, you should check out what we’re building at 4Degrees!

Related Content

Subscribe to the 4D newsletter

Helpful updates and content from 4Degrees.