One common frustration for investors, from private equity fund
managers to family office executives,is that it can be exceptionally
difficult to source high-quality, attractive deals that haven’t been shopped
around to every other investor already. I wanted to share 3 strategies that
will help you regularly gain access to better deal flow.
Plant Your Flag: In order to source great deals and investing opportunities
that are in line with your objectives and criteria, you need to communicate
what exactly you are seeking. It might seem counter-intuitive to narrow
your scope by sector, allocation size, EBITDA range, and similar
filters but doing so will tell companies, investment bankers, investment
firms, and other deal sources what deals are a match for you.
You might even consider establishing yourself as an investor exclusively
in a specific industry or niche like logistics, textile manufacturing,
or a similarly defined segment of the market. This will enable
you to focus your team on only forming relationships within this
market and you will gradually establish yourself as a top player in the
I was recently approached by an industry friend who runs a small, regional
bank and he asked if I knew of any firm that partners with banks like his.
Instantly, a name popped into my head of a private equity firm that I met
with that focused exclusively on independent banks and financial firms.
That connection would not have been possible had that private equity
firm not planted its flag firmly in the banking sector so that everyone,
including myself, knows exactly what they invest in and what type of deals
they are interested in.
Get Out There: There is a tendency, especially among investors, to wait
for deals to come to them, rather than seeking out deals, building networks,
forming relationships with companies and deal sources, and proactively
working to develop deal flow. If you are serious about sourcing deals and
developing a strong deal pipeline then you need to get out in front of the
world and attend industry events, speak publicly (with compliance/legal
approval, of course), establish your brand and focus, and become a leader
in whatever areas of investing you focus on. For a family office or
pension fund that has always had investments presented to them in the
past this is a complete change in strategy and it can be challenging.
It is pretty difficult to bring an investor a high-quality, proprietary
deal if you don’t know the top executives, the firm doesn’t
have a website, and they do not share any of their investing priorities or
focus with outsiders. The most successful investment firms and direct
investors have developed a strong foundation of deal partners, they have
representatives attending and even speaking at conferences, their executives
are quoted in the newspapers, and they make a strong effort to get out
there and meet with companies and other investors.
Provide Value to Your Deal Partners: If you want to access better deals
and ensure that you are one of the first calls when one of your deal
sources comes across a new deal, then you need to take care of your
network and provide value in return for their help.
For example, we maintain a number of deal partners within a Top 50 Deal
Source database. We use this database along with our Customer
Relationship Management system to help our team make sure and touch
base with these relationships and make sure that they are receiving value
from us. Otherwise, you are expecting something for nothing if you want
deal sources to simply hand you interesting or attractive deals and never
receiving anything in return. So we make a concerted effort to share
insights, invite these parties to attend our relevant events, meet with
us at an industry conference, send a free copy of a book we write, or
provide some other piece of value that reminds them of our firm and also
makes sure that they value the relationship.
You might find that your network of deal sources only includes a few
merchant banks, an investment banker, a couple of private equity firms,
and 5-10 institutional investors, or if you are more active, you might
need to develop a sophisticated system for tracking more than a hundred
deal sources. Whatever the size of your deal source network, be sure and
deliver real value consistently and treat the relationship like you would
I hope that these strategies help you identify great deal partners, source
high-quality deals, and ultimately improve your performance. If you would
like live training on raising capital and working with investors, be sure
to attend our upcoming full-day Capital Raising Workshops and our
family office conferences:
By Theo O’Brien, Managing Director, The Family Office Club.