How effective buyers generate M&A deal flow

When Casey Stengel was managing the New York Mets, a sportswriter criticized him for having “too much pitching.” Casey’s famous reply: “You ain’t never got too much pitching!” In the M&A business, “You ain’t never got too much deal flow!” Here is how effective acquirers maximize their deal flow, the first step to making successful acquisitions:

1. Create a sharp website. Engaged acquirers create a website that (a) introduces the prospective buyer, (b) describes the type of acquisition desired in terms of industry, size, geography, etc., (c) underscores the acquirer’s funding capabilities. It serves as a point of reference for both intermediaries and sellers while demonstrating that the acquirer is serious.

Virtually all financial sponsors have websites; the best state their acquisition criteria — the more specific the better. When selling businesses, investment bankers comb through these websites to learn what each sponsor wants and understands. Strategic buyers, even those that rarely make acquisitions, should include their acquisition criteria and internal contacts on their websites.

2. Respond when shown opportunities. Buyers who want to maximize deal flow respond promptly when shown an opportunity. This demonstrates that the acquirer is actively working, not just reviewing deals at leisure. If the answer is “no,” effective acquirers say so, give the reasons and, if possible, suggest who might be interested.

3. Get to know the M&A community. Effective buyers go to extraordinary lengths to get to know investment bankers, brokers, lawyers, accountants, lenders, etc. This involves emailing, snail mailing, calling and visiting them, always reiterating the acquirer’s acquisition criteria. But it also means attending and getting to know (as opposed to saying hello and then leaving) attendees at trade shows and events sponsored by the Association for Corporate Growth, the Turnaround Management Association, the Secured Finance Network and industry associations. More than just socializing, the effective acquirer, like a broken record, frequently repeats the specific acquisition objectives.

4. Proactively reach out to potential sellers. Successful acquirers directly approach companies that they like, whether they are for sale or not. Often, they approach every participant in a targeted industry. These buyers (a) find sellers who contemplate a sale or are in the process of selling, (b) get into sellers’ minds for when they will want to sell, (c) possibly learn about other companies for sale and (d) impress the M&A community that they are serious about buying a business. Whenever my colleagues and I are engaged to sell a company, the seller starts by listing the prospective buyers who have expressed unsolicited interest.

5. Engage the whole organization. Acquisition-minded teams expand their deal flow because everybody, not just the corporate development person, is always looking and listening. At trade shows, industry meetings, civic events, etc., multiple people are attuned to prospective acquisitions. 

6. Don’t let perfect get in the way of good. Somewhere on Mount Olympus is the perfect acquisition. Greek mythology aside, the best way to increase deal flow is to garner a reputation for seeking value in every good opportunity.

Mark A. Filippell is managing director at Citizens Capital Markets

Mark A. Filippell

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