According to a recent study, the average firm looks at 80 opportunities before it decides to pull the trigger on one of them. The same research also revealed that closing a single deal requires an average of 3.1 full-time investment team members—and 20 meetings with management.
There has to be a more optimized approach PE firms can take. After all, reviewing those 79 non-pursued opportunities takes a lot of time and resources. You never know when you might miss out on the deal of a lifetime because you’re spending too much time on deals you’ll pass over.
PE firms, by and large, understand that this is the case, but should strive to improve their deal-sourcing practices. Seeing as PE investing is already likely to increase in 2016, firms would do well to streamline their processes to encourage the continuation of that trend.
Use a Technology Platform to Make Things Easier
From real-time communications, to personalized experiences through targeted marketing via big data, technology has streamlined many business processes. Deal-sourcing should be no different.
And it doesn’t have to be. Private equity firms should institute a technology platform that’ s tied to formal benchmarks and metrics. Eliminate the guesswork. Such tools help ensure that the relationships being developed have a reasonable likelihood of yielding investments. Data doesn’t lie.
Deal management platforms help members of the investment team keep track of all relevant data from one central interface. Users can keep tabs on data relating to deal activity and reporting by industry, region, product, and team. They’re also able to store all pertinent documents so that they don’t have to dig around trying to find something specific.
Quite simply, technology platforms can streamline the entire sourcing process.
Regularly Follow-Up with Priority Companies
When you’ve spotted a fantastic deal, you need to move quickly. You can’t afford to let a conversation die off. You need to keep injecting life into it until you close the deal—or decide it’s not the right one to pursue.
That’s another reason why technology platforms are so critical. Investment team members can use integrated email marketing tools that ensure consistent communication. Such platforms reduce the likelihood people will simply forget to follow-up.
They also make companies feel valued, like you’re keeping them at the top of your mind.
Maintain Consistent Dialogue with Key Prospects and Sources
To source the best deals, firms need to be fantastic at communicating. But according to a recent survey, exactly zero PE firms were rated “excellent” at communicating. Just 30% of them were rated “good.”
There’s an opportunity for your firm.
Make stellar communication a cornerstone of your firm, and you’re likely to differentiate yourself from your competitors. Eventually, companies and entrepreneurs will take notice, and better deals will flow your way.
Use Multiple Outreach Methods
To source the best deals, it’s imperative that you accommodate potential investors as much as possible. If they’re the kind of person who’s glued to their phone, call them. If they’re in their inbox all day, shoot them an email. If they’re always making the rounds at conferences and tradeshows, meet them in their preferred environment.
The best approach will combine multiple modes of communication. This allows you to obtain maximum coverage of prospects and deal sources. The last thing you want to do, for example, maintains an email correspondence with someone who rarely sends emails.
If you cater to potential investors, you’re likely to source better deals.