Supercharge Your PE Firm’s Direct Sourcing with Data and Content
These insights were coauthored with our friends from SourceScrub, a data platform that enables M&A deal origination efforts.
COVID-19 has had a stark impact on the middle-market dealmaking universe. From economic headwinds facing target company industries to canceled conferences and meetings—it has been a tough time to drum up deal flow.
Most private equity firms took the first few months of the pandemic to focus on portfolio company stabilization, but new deals are becoming a priority again. This is facilitated by firms departing from old deal flow generation tactics and embracing enhanced direct sourcing methods along with new virtual tools.
In order for firms to properly pivot into the next iteration of their business development efforts, they will need to focus on data gathering, customer relationship management (CRM) system organization, branding and content marketing through thought leadership.
Modern Day Deal Flow Starts with Data
Data collection and organization are essential for modern-day deal flow, especially given COVID-19’s impact on traditional deal sourcing methods. Many PE firms are noting fewer incoming deals from investment banks and are therefore setting their sights on direct sourcing. In order to take the greatest advantage of your direct deal sourcing opportunities, you need to make sure you’re leveraging the right data.
In the past, direct deals were sourced through networking, meeting at conferences, or spending hours gathering possibly old or inaccurate company data through web searches. Each of these tactics has a common goal—find the right company data for potential deals.
Top data points could include financial information, employee count, growth intent and competitors, to name a few. All of these data points can be extremely difficult to aggregate by “old school” tactics. Even once you aggregate the data, how do you know what is important and what isn’t? The whole process is inefficient.
Another pain point is the excessive manual work required to understand and mold the data to your firm’s own processes. Most firms now use some sort of CRM, whether it be Salesforce, DealCloud, or another application entirely. Although having a CRM is more of a “new school” approach, firms who aren’t using anything for data enrichment still have one toe in the “old school” approach.
All of these issues can be solved by using an M&A data platform. SourceScrub, for example, exists to streamline the deal flow process by providing all the right data and private company signals on a digital platform. The platform holds essential data points like executive contact information, private company signals, including strong company growth signals with trended employee count, and company activity such as news alerts, what conferences companies are attending (even if virtually) and Alexa web data. You can also sync data into your CRM or integrate it with your firm’s proprietary system.
Data-Driven Content Strategy
The more you know about your prospects, the more tailored you can be in your approach. The team at MiddleM Creative works with investment banking, private equity and financial services clients to develop business development outreach strategies driven by data and business goals.
Thought leadership content marketing is often a critical element of the strategy. Firms find the most success when they can share targeted messaging and position communications to speak directly to the issues companies are facing.
The data informs the strategy and makes sure firms are not wasting resources by attempting a “boiling the ocean” approach to outreach. With the right data, you’re able to reach those people who are most likely to engage and respond with a call-to-action that makes sense for them and their company.
Firms with a sector-specific focus should lean into the sub-vertical expertise that only they can provide. Your team is likely speaking to all of the key players in the target’s industry on an ongoing basis. Those conversations and experiences have an immense value that, if shared through content, would help your prospects realize how deeply your team understands their space.
Content marketing, when done right, is a trust-building tool. It shows your prospects your expertise, willingness to lead and personality. It is likely that every team member in your firm has something of value to share that would help target companies gain a better understanding of what it would be like to work with you.
Communications should also emphasize relevant prior investments and transaction experience, operating partners with deep experience in the target’s industry and the investment theses given the current environment. Along with thought leadership, this provides a complete package for your prospects’ evaluation of your firm, creating mutual understanding and alignment before a request for a call or meeting is even made.
Connecting the Dots for Pipeline ROI
While measuring the exact ROI from BD and marketing efforts can be challenging, there are many ways to understand performance and strategize for further improvements to your data-driven content strategy.
When producing content, it’s important to simultaneously create a strong distribution strategy. There are many effective outlets for distribution, and the profile of your audience will determine the best strategy for your firm. Often, firms find a combination of channels to be most effective—including posting the piece to your website, sending a direct one-to-one email to a targeted list, sharing on LinkedIn or publishing through industry-specific publications. Each content distribution channel will amplify the message and results.
General engagement can be tracked by gathering native analytics from each platform where the content is distributed. While comparing against industry benchmarks can sometimes be helpful, it’s best to compare against your own prior results, being mindful of seasonality, distribution list quality, and the content topic’s relevance to your audience. Measuring analytics seven to ten days after a piece of content is posted will give you a good idea of relevance and engagement.
Instant engagement data can be a great driver for follow-up outreach. If your email analytics are tied to your CRM platform, you can build dashboards and create workflows that help identify where companies and contacts shift in the pipeline based on their engagement with the content you are distributing. Depending on your technology stack, there may also be opportunities to implement a form of lead scoring based on a prospect’s engagement level with the emails they have been sent.
The Future of Deal Sourcing is Here
We’ve all seen a necessary shift in middle-market M&A due to the drastic changes in the world around us—but these alterations are not without opportunities. Digital deal sourcing can serve to simplify the notoriously inefficient middle-market deal sourcing process.
Illusive private company data can be easily compiled, sorted and leveraged. The expertise and knowledge in the minds of your team members can be extracted and shared to build trust and form relationships with prospects. When you establish the right partnerships supported by the right technology, deal sourcing doesn’t have to be so difficult.