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Private Equity

6 Ways PE Firms Can Supercharge Business Development

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We recently surveyed Axial’s team of BD consultants on best practices of successful private equity firms. How do the most experienced and effective PE firms in the middle market approach inbound and outbound business development, and what are their biggest challenges?

Our team works with dozens of PE professionals every day, across a wide variety of industries and geographic areas. Here are their tips for private equity firms looking to ramp up their BD strategy.

1. Pull double-duty at conferences.

ConferencesThe most effective PE firms on Axial attend an average of 1-3 industry-specific or business development conferences per month.

For nearly every industry vertical, no matter how niche, there’s a tradeshow or event to go to. For example, a firm interested in acquisitions in the marine industry might attend events like IBEX Show, Pacific Marine Expo, or Nautic Expo, depending on specific areas of interest. If you’re sourcing within a category where you already have a portfolio company, do double-duty. Represent your current company to the best of your ability — but don’t miss out on opportunities to make connections and broadcast your experience.

If you’re heavily invested in or seeking to invest in a given area, industry-specific events should be on your radar, even if you don’t make it there in person. Know who’s attending or exhibiting. Research what ideas or products or sub-sectors the conference is highlighting. This information can provide a talking point for subsequent outreach, and also help you identify nascent industry trends. Successful PE firms are always looking one step ahead. For example, are multiple medtech conferences focused on 3D printing? This might be a sign that this subsector is heating up and could see high valuations in the near future. 

2. Don’t skimp on outbound calls.

CallsSuccessful private equity firms on Axial place upwards of 200 outbound calls per month.

What’s the best way to make those calls count? “All outbound efforts should be premised on a warm introduction,” says Kari Lukovics, BD consultant at Axial. “Don’t just introduce your firm — show the person on the other end how you can help them.”

Axial’s team identified thoughtfulness as the #1 most important quality of a successful BD strategy. This is especially relevant when it comes to making targeted calls. Best-in-class firms are articulate and precise enough to go beyond a baseline list of coverage.

3. Don’t waste a single hour in your hotel room.

With sky-high valuations and so much dry powder in the marketplace, you just don’t have the luxury of whiling away your evenings eating room service and watching an exorbitantly priced movie. A conference may be the reason for your trip, but it shouldn’t be your sole purpose. Make up for time spent waiting in security lines and taxi queues and rental car desks by scheduling meetings with any potentially valuable contacts in the area. This can be particularly impactful when traveling to secondary markets, where bankers see fewer investors come through their doors. A conversation over a drink or cup of coffee could lead to a proprietary relationship for years to come.

What if you have dozens of contacts in Saint Louis but only 24 hours in the Gateway City? That’s where tiering your contacts come in. Use your CRM to establish a system for keeping track of the most productive relationships in your Rolodex (e.g., who sends the most deals your way? Who sends the most high-quality deals? Who is most keyed-in to your industries of interest?). Then, prioritize your meetings accordingly.

Check out this article for more travel tips.

4. Don’t be a technophobe…

Online …unless you want to miss out on deals.

Traditionally, the barrier of entry to high-quality deals has been very high. Putting deals online makes the barrier much lower, particularly for tech-savvy firms willing to invest time, energy, and money into those channels. Axial member Sterling Partners, for example, has received upwards of 1350 deals on Axial, been introduced to nearly 600 new sellers, and pursued more than 100 opportunities. Digital networks can make it easier for people to understand your investment mandate, streamline the NDA process, and ultimately save time and money.

The majority of successful Axial members split their time 50-50 between online and offline BD efforts. “In addition to using Axial to increase deal flow, PE firms need to invest seriously in a CRM system,” says BD consultant Allison Rosburg. Popular examples include Salesforce (often together with Navatar) or Dynamo. In addition to CRMs to track contacts, research tools like Pitchbook, CapIQ, and Preqin can help firms ensure they always have the latest industry data and market comps. (Here are 4 tech tools Joe Burkhart of Saratoga Investment Corp., an Axial member, recommends deal professionals use every day.)

Says Rosburg, “My most successful firms are always adapting.  Of course they still work hard and subscribe to the old way of doing business (e.g., conferences, travel, in person connections), but they also completely embrace the internet. They have an up-to-date website, good Google search results, and they are very active Axial users.”

5. Don’t get lost in the Web’s web.

discoverabilityThe biggest challenge for 80% of Axial PE firms we polled was online discoverability. This is followed closely by website development and online profile optimization. These are initiatives that may seem secondary to firms without dedicated marketing or BD resources; they’re easy to push farther down the roadmap. But an investment in this area can pay huge dividends. If you’re turned off by the cost, compare the cost of your website to that of in-person conferences. The conference lasts 24-48 hours, but your website is available 24 hours a day, 7 days a week, 365 days a year. 

6. Put CEOs at ease.

It’s not all about money and marketing prowess. Being personable, articulate, and trustworthy matters a whole lot too — particularly when it comes time for in-person meetings. Lukovics says the most effective PE firms she works with are “great people with awesome personalities. They’re people whom CEOs feel comfortable around, people to whom they’d feel comfortable leaving their business. They’re able to prove they have the financial know-how to protect the owner’s legacy and take his or her business to the next level.”

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