The private markets are traditionally extremely difficult to penetrate, especially if you are starting a new investment group or are a corporation looking to make acquisitions in markets outside of your direct operating industry. Because of the sheer size and opacity of the US middle market, sellers are making decisions around who to connect with using imperfect or inadequate information. It is thus advantageous for buyers to present sellers with as much information as possible so as to stand out against the backdrop of such a hazy environment. Maintaining a presence and staying in focus has changed with the advent of social media and private market networks.
Most deals have traditionally been sourced through relationships cultivated over many years through a number of direct and familiar channels. The most common sourcing methods have been conferences and outbound phone or email efforts. Conferences provide buyers with the opportunity to build stronger connections with existing partners and to meet with new potential sources of deal flow, while outbound phone and email connections have been used to either connect with unknown partners or reconnect with those met at events. Yet sellers don’t bring companies to market based on an upcoming conference schedule, and may forget about you entirely or your specific investment criteria within a few months of meeting.
Today there are more efficient and productive ways to persistently source opportunities and to remain visible among sellers so that the timing is always right. Your online presence is critical to improving the success of your deal sourcing efforts. This will allow advisors and entrepreneurs to remain informed about your current acquisition mandates. What options are available to you? You should be involved in social media, maintain a robust website, and participate in online networks where business owners and investment bankers congregate to enhance your visibility.
Many buyers in the private markets don’t have a website, aren’t ever going to be in a database, and don’t blast their criteria via email. This is particularly true of mid-sized strategic buyers, who for many reasons do not have well-known M&A strategies. As a result, many advisors will not know what deals are relevant to your investment criteria. Creating a simple website will give sellers the opportunity to perform research on your company before reaching out.
Relationships drive M&A. But relationships are moving online; they’re no longer just offline. The nature by which relationships are formed, maintained, and cultivated is undergoing a transformative shift today. Social media creates visibility and accessibility in front of the right audience at the right time. Use it to create new relationships, re-kindle old relationships, articulate your company’s strategy and operational expertise. If you haven’t already done so, download our Social Media for M&A Guide to get started or to brush up!
Private Market Networks
SecondMarket and Axial focus on helping you connect with sellers of companies. They are networks of active buyers and sellers using research and messaging tools to discover each other and engage around relevant opportunities at the right time. They give buyers (of companies, shares, debt, equity) the ability to manage a presence that reveals your expertise. Managing your identity on these networks ensures you’re visible, “find-able” and “research-able” at the moments that an M&A professional is researching and preparing to engage prospective buyers.
Online social media and M&A networks are not meant to replace traditional origination efforts, but are meant, rather, to complement them. Being consistently present and active on social media and M&A networks multiplies the effectiveness of your other origination tactics, and keeps you top of mind with investment bankers and M&A advisors at the moments they’re bringing deals to market.