After the pandemic caused a severe reduction in dealmaking volume, closing new deals has become the top priority for private equity firms heading into 2021, according to DealCloud’s Fall 2020 Dealmaker Pulse survey. Nearly 70% of private equity professionals said their firms’ number one focus is new acquisitions, and 50% revealed that they expect a significant increase in opportunities from founders as business owners look to exit or find liquidity amid such uncertain times.
With such high demand for assets, you’d think that investment bankers have it easy right now. But in reality, countless advisors, brokers and bankers are struggling to connect with qualified buyers. Worse yet, it’s becoming increasingly hard to find a buyer that actually fits the profile for their client.
It is imperative that these intermediaries find the right buyer-seller match. In order to do that, they need to recall past deals, analyze countless investment theses, gauge personality fit, predict tricky deal dynamics and anticipate potential disagreements. The only problem is, most can’t. The pandemic has left them grounded and unable to have face-to-face interactions.
Over the last eight months, it has become clear that bankers who rely on spreadsheets and email to track deals and relationships may not have the right tools for the complex task at hand. For starters, these tools do not provide access historical transaction data, which causes them to start from scratch when assessing the market for likely buyers. Without modern solutions, bankers can waste many hours tracking down which private equity firms showed a high level of interest in retail companies based in the Midwest with earnings before interest, taxes, depreciation and amortization (EBITDA) greater than $15 million and at least three years of positive cash flows following the global financial crisis, for example.
Leading investment banks have implemented purpose-built CRM solutions like DealCloud’s Target Builder, enabling them to quickly and intelligently build lists of buyers on command. Instead of manually combing through mountains of data, this kind of technology allows bankers and advisors to access decades of institutional knowledge on buyers, effectively reserving more time to manage the relationship with the seller.
Private equity firms have a ton of dry powder, so investment banks would be wise to invest in systems that allow them to quickly zero in on a set of motivated, quality buyers. Banks could then act quickly and secure deals, and perhaps most importantly, bankers and advisors would be able to act efficiently in the best interest of their clients.