M&A BD teams acting like sales teams are closing more deals

Impersonating a sales department might just help business development teams close more deals.

Only 9% of mass sales emails get opened, according to Gartner. Despite this fact, PE business development teams still send mass emails, customized with nothing more than an executive’s name.

There’s a better way to do cold outreach: segmenting lists and leading with value. Sales teams have been experimenting with these strategies for years and found that open rates dramatically increase when an email educates the reader about their industry or addresses a challenge they face (a 14% increase globally, according to a Mailchimp report).

According to William G. Freels III, Managing Director at Andra Partners, “Company owners have told us on many occasions that they receive numerous calls on behalf of private equity firms, and the fact is that many do not want to sell their life’s business to any firm that does not understand and know their sector well.”

From the onset, BD teams face the same challenges as sales teams– encouraging a recipient to not only open and read their email but respond to it. Executives are busy. BDs have approximately 11.15 seconds to answer: 1) why an executive should read their email and 2) why they should respond and begin the conversation with their firm. 

Hedging their bets, many firms take an easier, less personalized approach, but there’s value in approaching targets differently.

Thematic Sourcing Fuels Segmentation

A thematic, strategic approach to M&A breaks down an investment thesis in the “Industrials” sector into specific categories like “manufacturers of cryogenic equipment.”

With more specific categories, BDs have the opportunity to craft emails to those business owners that highlight a firm’s expertise in their specific subsector. And that kind of value prop can increase open rates, meetings taken, and deals closed.

With a broad investment thesis like “Industrials”, you may see 0.1% of 1,000 email blasts respond. With segmented outreach, you will see your close rate improve.

Thematic sourcing does not mean sacrificing the number of opportunities in your deal pipeline. In fact, the opposite is true: if you have a more effective sourcing method, you can cover more companies at the top of your funnel. 

Kingfish Group tested this thematic vs non-thematic outreach in 2022 with a group of new targets with no existing relationship to Kingfish. Thematic outreach resulted in 6% higher open rates and a 9% increase in responses. ‍

Thematic Outreach Requires a Deal Sourcing Platform

If the results are so dramatic why aren’t more dealmakers looking to thematic sourcing to boost deal flow? Many firms have not invested in the right tools to accomplish this kind of customized outreach.

Without the ability to search by industry (“Industrials”), by business model (“Manufacturing”), and by keyword (“Cryogenic equipment”) all in one place, BD teams cannot map campaigns effectively. You need to find these companies before you can reach out to their executives and you cannot find these companies without a deal sourcing platform like Grata.

There’s a new way of sourcing called “deep search” that incorporates industry and keyword search in the Grata platform and it’s driven a new form of BD outreach. A form of outreach that incorporates sales’ teams secrets about how to pitch. 

Leaders in investment banking are already approaching outreach this way. Patrick Nolan, President, Nolan & Associates, says, “By utilizing marketing and deal outreach email campaigns with targeted contacts and highly tailored messaging, we experience open rates in the 40-50% range and click rates in the 10-20% range. We have shifted away from a mass marketing approach to our communications by coupling Grata’s data with industry-specific messaging that provides value to our network of business owners.”

Thematic Sourcing Means More Closed Deals

Before you overhaul your business development strategy, define specific segments, and collect valuable insights for business operators, you should be asking one important question: “Does thematic search lead to more closed deals?”

Spearhead Corporate Development conducts highly specialized, thematic outreach for their clients. One client’s mandate (from March 2020 to December 2022) included 6,427 touchpoints to 1,032 targets. The funnel narrowed down to 574 responses to 123 fully qualified deal ideas, says Sebastien Douville, Managing Partner and Co-Head at Spearhead.

From the initial list of 1,032 targets, there were 4 LOIs signed and 3 closed deals. 

Thematic sourcing doesn’t just mean higher open rates on emails. It means more meaningful conversations with targets, more deals in your pipeline and–most importantly–more closed deals.