Buyer lists are built for one reason: to identify the most likely buyers for your deal.
However, identifying the most relevant pool of buyers has become both increasingly time sensitive and time consuming. As Brian Trauth of The Capital Corporation explained, “New funds are emerging everyday, which makes staying up-to-date a difficult process.”
To successfully meet this demand for real-time information and create robust and responsive buyer lists, investment bankers and M&A advisors are employing an array of new techniques and tools. Despite the incorporation of these new techniques, most approaches continue to operate within broader top-down or bottom-up strategies. To get a better understanding of these two major strategies, we spoke with Trauth and Charles Compo of Carriage Hill.
The Top-Down Approach:
Trauth’s strategy of choice is a funnel-like one. He begins every buyer list creation process by collaborating with industry-specific players and casting a wide net for potential buyers. “I start the process at the highest level and try to identify all potential buyers in both the strategics and financials camps. I like to think about any potential investors that might have some benefit from this opportunity, even if it is a bit tangential.”
Trauth then whittles down the list to a more manageable size, using a variety of matching criteria. “Once we get a small enough list, I review the list one-by-one, determining the appropriateness and relevance of each buyer. This more nuanced review requires a combination of experience, industry knowledge, and ability to read between the lines.”
However, Trauth recognized that his initial net was never quite thorough enough. As such, he sought a tool that would enable him to expand his network and identify the real-time interest of buyers. He explained, “15-20 years ago, whoever had the biggest network was the best bank. Today, it is more about your tools than your existing network — you can find relationships you never had before.”
Since joining Axial, Trauth has been able to find those new, relevant relationships. “There were firms that I had never met before and had never appeared in any of our searches.” By importing his existing network into Axial, Trauth is able to send any relevant opportunity both to his existing relationships and to recommended Members — all with just one click.
The Bottom-Up Approach:
On the other end of the spectrum, Charles Compo of Carriage Hill employs a more bottom-up strategy. “Traditionally, we tend to engage with buyers with whom we have a relationship. Since we do not run broad auctions, it is very important to have relationships with the investors and to understand their behaviors and interests.” He added, “Investors tend to pursue us because we have such a unique model and offer proprietary deals.”
While Carriage Hill’s proprietary deals attracted investors to the firm, Compo understands that in order to stay competitive he can’t rely on reputation alone. He explained, “One of the reasons we decided to join Axial is that we want to continue to expand our relationship base and are always looking for new people to meet and new relationships to cultivate.”
Compo is a Member of the network so that he can integrate his new relationships with existing ones and stay informed of active investment preferences. “If you are in the relationship business, you have to spend a fair amount of time building relationships. You have to build the relationship process somewhere.”
By cultivating these relationships on the network, Compo can better match sellers with relevant buyers in real time. “Building a buyer list definitely requires a combination of both art and science. The science part is the matching of the basic characteristics of buyer and seller — available capital, desired structures, etc. It is black and white.”
However, Compo was quick to add that the challenges of any match lay in the subtleties of the match. “You need to judge the qualitative characteristics of the match between the buyer and seller. You need to match their personalities and this can only be done by sitting down with the investor and seeing if his personality would match the client’s. And vice versa.”
By managing his network and relationships on Axial, Compo is informed any time a Member of his network updates their Transaction Profiles. This timely information ensures that Compo is able to spend more time on the subtleties of the match and send the right deals to the right buyers at the right time.