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Beyond Basic Deal Sourcing: Advanced Tactics for M&A
Whether you're in PE or investment banking, advanced deal sourcing is a great way to find lesser-known M&A opportunities.
Private Equity
Article

This blog post is part of an eBook on Strategies to Maximize Your M&A Deal Flow. You can download it for free here.

There's no way around it — proprietary deal flows in the M&A space can really help you find unique deals that few others are competing for.

There are several reasons firms prefer to source their own deals instead of relying exclusively on intermediaries and advisors. That could be to diversify deal sources, save money, or even carve out a unique business niche.

Whatever the reason, if you’ve already nailed down the basics of proprietary deal sourcing, it's time to move on to more advanced tactics.

As Simon Blackburn, a senior M&A partner at McKinsey put it, "It's not enough to have a digital strategy. You need a strategy that's robust in an age of digital disruption."

These methods will help your company stay ahead of the curve and find deals that nobody else knows are out there.

1. Thematic sourcing

It's easy to feel scattered with the sheer level of deals your company could potentially source. Instead of flitting from industry to industry, pick a niche in which you can specialize and become an expert. Not only does this allow you to build a community, but it often offers higher returns as well. Limited partners and investors often prefer this approach.

You shouldn't necessarily choose a singular theme or industry forever, but you can build up a cachet among a handful of industries over time. You may have a hard time finding companies in your target industry and size. That's when a B2B search engine comes in handy — you can search quickly for specific information then have the correct contact info ready.

2. Predictive signals

It's important to know that you're finding the right companies at the right time. When you're deal sourcing, it's worth finding out information such as:

  • Is the company growing?
  • Is the company shrinking, or do they need capital?
  • Is the company going to raise a round of funding soon?
  • Are they expanding, or entering a new phase of their journey?
  • Are they hiring for roles that signal their interest in being acquired?
  • Has leadership changed recently?
  • Has the founder/owner hit retirement age?
  • Is the company doing acquisitions?

Uncovering these predictive signals will help you to better-qualified leads and close deals faster.

3. Proprietary data

In one Accenture study, 97% of those surveyed acknowledged that proprietary data was "very valuable" or "quite valuable" to differentiate the company from competitors.

Proprietary data offers a powerful source of information that allows your company to find better deals even faster. The more data you collect, the more options you have.

Building customer personas is a tried-and-true market research method that works for all types of companies. Software like Gong offers a great opportunity to collect data from current prospects and customers.

However, collecting proprietary data from phone calls and meetings doesn't really help companies find new deals. For that, you need a way to get it from outside in. As Forbes insights shares, there are a few primary ways to hack together your own proprietary data:

  • Scraping – Collecting publicly available but scattered data
  • Partnering – Exploring partnerships between different established companies
  • Crowdsourcing – Asking teams to collect data, or outsourcing the work

Dig deeper for industry-specific data sources, or look for nuanced tags that tell you more about a company. Any details might help you fill in the blanks and get a better understanding of where you can find new prospective clients.

4. Similar companies

Which companies have you invested in with success? Are they in a specific industry, do they have a specific employee size, are they at a certain company stage or funding round?

Break out all these pieces so you can develop a strategy that targets lookalike companies. Over a short period, this should save your company market diligence time, with less time to close and an increased chance of closing.

5. List expanding

Chances are, if the company is listed in some kind of media, competitors are already looking at it. For the most cutting-edge proprietary deal sourcing, you'll need to discover companies before everyone else does.

Take an industry list of companies and find similar companies that competitors aren't looking at. You may find this list from conferences, industry organizations, blogs, or other data sources.

Here are some other creative ways to expand your list:

  • Try Facebook's lead ads
  • Host or sponsor webinars
  • Create free online courses
  • Offer downloadable content, like whitepapers
  • Use Google ads
  • Conduct industry surveys

...

Whichever niche you decide to target, taking deals into your own hands will open up a wealth of opportunity that will build on itself over time. Gathering information and building long-term relationships are the most important investments you can make in your company.

Grata Can Help

Grata is a modern company search engine for proprietary deal sourcing and targeted B2B campaigns. Grata’s search engine enables you to find private companies by strategic fit: what they do, how they’re positioned, and the markets they target.

Break free from legacy databases and Google search and leverage NLP-driven search to find companies that are right for you. You can learn more about Grata by speaking with a member of our team. Get started here.

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