Why an Investment Bank Filters and Targets Buyers

By Generational Equity


Over the years we have examined some of the key services and benefits that investment banking firms offer their clients. It is vital to look at these as all too often business owners make the mistake of assuming that, because they run a successful business, they will likewise be very successful in running an auction process for their business with potential buyers, without professional guidance.

Far too often this is not possible simply because the buyer universe is so vast that determining who to approach is daunting for most business owners. (not to mention the critical step of what documentation to approach buyers with!)

If you can navigate the former, the latter is nearly impossible for most given a lack of investment banking experience.

Building Targeted Buyer Lists

This is one reason that Generational Equity dealmakers are so successful: They have the ability to filter out the noise (i.e. non-optimal buyers) and create highly successful, very targeted buyer lists.

The value of this talent was recently pointed out in an article by our friends with Axial. Entitled, “Don’t Be a Basic Buyer”, it was written to provide advice to private equity firms as they approach investment banks with their purchase criteria. It reminded me of the key service our teams provide our clients: We eliminate the non-essential prospects and provide our clients with buyers who are optimal strategic fits for their businesses.

This may sound simple and logical, but the reality is there are hundreds of thousands of buyers of businesses spread throughout the world (we have 34K registered buyers in our database alone). Cutting through the “noise” that these  buyers create is a vital service we provide to our clients.

In the article, the author “chides” some PE firms for the broad, very generic descriptions of what they are after, often sounding like this:

“We’re a new private equity fund with over $X million in committed capital. We’re looking for companies in North America with over $X million in EBITDA. We are a generalist firm that likes profitable businesses with strong management teams and a good growth strategy. Please reach out if you have any opportunities of interest.”

Axial’s point is this: How does an investment bank respond to such a generic description as that? And to make matters even worse, multiply that by 10-15 per day per banker and what do you get? 

Emails full of useless data!!

Our deal teams, many of which have decades of collective experience deciphering PE “speak”, know that the best option, which is also the most time-consuming, is to maintain a living database of solid buyers by doing something old fashioned: Connecting with them!

This cannot be overstated; if you are working with an investment bank, M&A advisor, or local broker, be sure that they are not using a pre-created buyer list that they have been recycling for years and years without any targeted, strategic direction. 

Which, by the way, is another good reason to avoid M&A specialists that only focus on a single industry – they are often rehashing the same buyer list over and over and over again, assuming the buyer will ONLY come from an insider-industry player.

Our dealmakers spend countless hours networking, talking, chatting, rubbing elbows, kissing babies, and dissecting PE speak to develop a keen understanding of what buyers are really after.

The behind the scenes value of this to you as a potential client is vital. On top of our one-on-one work the deal teams conduct, as a company we are committed to sponsoring and attending several ACG (Association for Corporate Growth) conventions every year.

These regional meetings (and the major annual meeting of all ACG chapters annually – called Intergrowth) are attended by literally thousands of potential buyers who our dealmakers meet with face-to-face to discuss mandates over a 3-4 day period. Although these ACG meetings are expensive to attend and sponsor, we find them to be invaluable in allowing us to glean vital information about potential buyers for our clients.

Again, one of the keys to our success is our proven ability to filter and target all buyer types for our clients, not just PE firms. We also do this for strategic buyers, international targets, FOGs (Family Office Groups), high net worth individuals and countless other potential buyer groups that exist. 

Targeting Buyers to Secure an Optimal Exit

Do filtering and targeting sound good to you as you consider your exit strategies? Do you even have an exit strategy or are you planning to take the first offer that comes along? No matter where you are on your exit journey, it is wise to partner with an investment banking firm that is dedicated to one goal: Successfully helping owners of privately held businesses transition to the next phase in their lives.

Here is what a few of our clients have told us about our success in targeting buyers for them:

Our program of success begins with education; we conduct complimentary exit planning workshops throughout North America where business owners just like you can learn a significant amount about exiting in an optimal fashion and at the same time, meet with our team of M&A professionals to discuss your specific needs.

To learn more about our conferences and our services, please call us at 972-232-1121 or visit our website and provide us with your confidential contact information and we will be in touch.

And no matter what, hire an M&A team that can filter and target your buyers for an optimal transaction!

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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