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Advisors, Private Equity

The New Proprietary Deal Flow


Proprietary deal flow: the gem investors crave.

Problem is, proprietary deal flow seems harder to come by these days. With an increasingly crowded lower middle market and savvier business owners, finding a non-auctioned deal is tough. But, are investors looking in the wrong place?

Welcome to the boutique intermediary community, where proprietary deal flow is common. Boutique bankers, advisors, and single shingle brokers have different tastes than larger firms, resulting in deals which receive more TLC and are not shopped in large auctions.

There are a few reasons why boutique shops offer the modern version of proprietary deal flow.


A large majority of businesses in the lower-middle market still have founders as their owner-operators. These business owners, who typically run companies generating below $10 million in EBITDA, are not just looking for the biggest bang for their buck; they are looking for the best partners to help realize the future of the company. This usually means working with regional advisors, who have already built strong relationships with CEOs in their local towns and cities (though these advisors also occasionally work on larger deals).

Boutique advisors typically work with these companies as they seek an exit or a capital raise. As their founders consider employees as close as family, they seek a capital partner that can help preserve their vision of the company and ultimately help it grow. During that process, they are more likely to take into account factors other than valuation. They have other interests, like “Do they specialize in my sector? Do we have a solid relationship? Do they understand my internal business culture?” The regional advisors are often the ones that provide that tailored approach.


Owners of smaller companies don’t have the time, resources, or inclination to go on 50 investment meetings when raising capital or selling their business. This motivates their advisor to think carefully about cultural fit when creating a buyer list, making it more selective. In addition, boutique advisors mainly charge transaction fees versus a retainer, and typically don’t do more than three deals a year. As a result, they’re incentivized to close a deal as soon as possible, resulting in a meeting between the investor and CEO within 24 – 48 hours and a meal together within a week’s time. This is very different from a more complex process via a large investment bank, where investors spend substantial effort pitching their value to the banker, way before any introductions are ever made to the CEO.


Boutique intermediaries might have anywhere between 1 and 10 employees. They lack the same infrastructure a larger bank does, so running a 12 week auction doesn’t fall in line with their operations. They spend most of their energy meeting business owners in their local communities, and working to ensure that finding a buyer is quick and efficient.

As an investor, you may be thinking, “Well, I get that it’s important to be more active with lesser known constituents, but in reality, most of my time is spent on nurturing the great relationships I’ve developed until now. This is where I have my highest hit rate.”

This is a very common reaction, and you’re right. You should spend most of your energy there. Those relationships are likely what has gotten you to where you are today, and may very well offer the highest probability of uncovering a qualified, actionable deal. Having said that, if you can also find an elegant way to target lesser known sources, you’ll be pleasantly surprised.

How do you do this when your time is already stretched thin maintaining relationships with bigger banks?

It’s all about conveying your unique message to an extremely haphazard market, saying “Hey, this is who we are, come find us.” This may entail hiring a new BD professional focusing solely on lesser known sources, taking advantage of online deal sourcing platforms like Axial, and/or revamping your digital marketing strategy.

You can’t make a good investment if you never see it.

This may be the year to start thinking about the unusual suspects.

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