Respond to investment bankers to encourage M&A dealflow

Financial sponsors yearn to attract incoming dealflow. They encourage investment bankers to show them acquisition ideas by all manner of marketing: publicizing their transactions, sending reminder emails, visiting our offices, sponsoring and attending events, calling to “chat,” offering lunch and golf games, sending tchotchkes with their names on them, etc. This proactive outreach is smart because buyers want to be top-of-mind when the type of businesses they want come to market.

When we are engaged to sell a company, we work with our client to identify the best prospective buyers. Then we typically reach out to them via an email containing a non-identifying executive summary and a phone message describing the opportunity. At this point, these contacted buyers divide into two distinct groups: those who answer promptly with thoughtful feedback and those who we have to chase to get a response.

We love the “first responders” who get back to us in a timely manner. If they are interested, we have them sign the NDA and then we share the confidential memorandum. But even if they don’t want to pursue the opportunity, they still get back to us. And when they do, they tell us WHY they are not interested, thereby refining our understanding of their acquisition criteria and how our sale client is perceived in the marketplace.

As a bonus, they may suggest other strategic, financial or family office buyers they think might be interested, thereby enhancing our marketing process.

Contrast this with the buyers we have to chase. We end up emailing and calling them a second time … and frequently a third time. Once we do finally extract a response, it is usually “Pass” or “If we would have been interested, we would have called you.” Rarely do they apologize for making us go to extra effort.

Now, there is absolutely nothing wrong with these buyers passing on the deal. But when they don’t show the responsiveness or courtesy to respond, they undermine their firms’ dealflow marketing efforts.

Strategic buyers, whose focus is more clearly defined, do not receive nearly as many acquisition outreaches as financial buyers. We generally approach the CEO or CFO with the acquisition opportunity. Again, the responses fall into two distinct groups: those who respond promptly with the name of the person who will review the deal and those who do not respond at all.

We appreciate the former, and many of our sale transactions end up in their hands. Many of the latter miss out because they do not have a predetermined person to evaluate acquisitions. By the time they sort this out … if they sort it out … the deal has already closed. These CEO-CFO teams are inadvertently signaling that they should not be considered when another strategic acquisition opportunity comes to market.

Those financial and strategic buyers who respond in a timely and responsive manner to investment banker M&A outreaches not only show courtesy, but they also enhance their standing as prospective buyers in the marketplace. ●

Mark A. Filippell is Managing Director at Citizens Capital Markets

Mark A. Filippell

Managing director
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