The Easily Avoidable Mistake That Private Equity Managers Break When Engaging M&A Advisors

You would be forgiven for believing that most private equity deals are sourced independently given the amount of time fund managers spend describing their “proprietary deal flow”, a persistent industry catchphrase. In fact, it is intermediaries that are the biggest deal flow spigot. That’s truer now than ever – a trend not lost on investors, who now pepper managers with questions about their relationships with investment bankers and brokers during marketing meetings. Managers not very good at engaging intermediaries not only risk losing out on prize deals, but increasingly so capital commitments too.

So how can managers improve their outreach and relationship with M&A bankers?

It’s a question we posed to four of the best intermediaries in the field as part of a wider roundtable on deal sourcing strategies, a conversation co-moderated by Blackford Capital’s Martin Stein, who provided the conversation crucial buy-side perspective.

One key lesson emerging from the roundtable discussion is the importance of being responsive.

Heed Basic Etiquette  

It sounds simple enough, but the roundtable said it would surprise many to learn that GPs often leave phone calls unanswered, emails hanging, and violate other basic rules of communication etiquette when engaging intermediaries.

Part of the problem is the nature of the job. Fund managers are extraordinarily busy people asked to prioritize multiple types of relationships, some of which get lost in the shuffle as portfolio management and other core responsibilities occupy the day’s hours. Fund managers that still rely on calendar reminders and inbox searches can easily lose sight of communication touchpoints and planned follow-ups with individual intermediaries, and may be unaware of other lines of communication opened by colleagues at the firm. Happily, the availability of industry software, such as Navatar Private Equity, provides a better way to centrally manage these relationships and prevents easily avoidable communication mishaps from leaving the wrong impression.

The platform should also allow for easier coordination amongst staff. The roundtable’s intermediaries pointed out that junior staffers are often the ones to initiate contact. If there’s a bite on the intermediary side, senior members from the private equity firm then step in and take over the relationship, sometimes unaware that introductory details and basic questions have already been hashed out by the junior staffer. “If the junior person started the relationship, it’s usually best to leave them involved,” advised during the roundtable Berkshire Capital chief executive Bruce Cameron.

There are hundreds of intermediaries out there competing for GPs’ attention with tens of thousands of deal opportunities. So while impossible to sustain a responsive, meaningful relationship with all, it’s important to prioritize the ones that matter most.