Search fund beginners are often encouraged to “personalize their outreach” in order to make progress with intermediaries and sellers. However, this vague advice fails to get to the heart of the matter. There are several places where you can add personalization early in an acquisition process that will pay dividends down the road. These opportunities include:
Your Initial Message to Brokers/Intermediaries
According to our sell-side contacts, a large majority of buyers include very little information about themselves, their criteria, and their funding strategy when conducting their initial outreach on an interesting deal. We’ve seen firsthand how few buyers include few details about themselves and their searches when sending an initial email to a broker, and even fewer buyers include relevant information when reaching out via a form on an online listing page.
We view this as a missed opportunity. Your initial outreach is an opportunity to stand out – share information about yourself and your search early in the process to maximize your chances of getting a response. At Private Market Labs, we facilitate this process by including buyer profiles in outreach messages.
Your Follow Up Strategy
In our experience, many buyers conduct very little follow up outreach to advisors and brokers on the deals that they like. We recommend building an outreach process with multiple touchpoints. While most brokers get dozens of inquiries on their deals, fewer buyers will follow up via phone and email multiple times. Stand out with your persistence and willingness to pick up the phone!
Your Questions After Receiving a CIM
Once you’ve signed an NDA and received a Confidential Information Memorandum (CIM), most deal processes will include a few rounds of questions from the buyer to the broker and seller. Use this opportunity to build a strong impression: you want your counterparties to recognize your knowledge and connection to the business. This means tailoring your questions to each specific deal rather than sending out a list of generic questions.
The Due Diligence and Negotiation Process
Once you’re under LOI with a deal, the pressure begins to rise. Both the buyer and seller want to move the deal forward and don’t want to be taken advantage of in the process. Each side brings in experts to support this process, and the presence of additional parties can create distance between the buyer and seller if both sides aren’t thoughtful in their communication.
As things get difficult, you can help smooth the way by maintaining a strong relationship with the seller and allowing your hired diligence experts to ask the difficult questions. This maintains rapport with the crucial decision-maker in the transaction. Remember, the seller is the only person with whom you’ll have a relationship after closing.
The Way You Structure Your Deal Process Overall
Kevin Henderson, partner at SMB Law Group and a recent Private Market Insights guest, offered some important advice during our conversation: sellers are wary of Private Equity buyers. You don’t want to seem like a “finance guy” but you do want to run a Private Equity-style process. This means communicating with the seller on a friendly and personal level while also clearly and professionally communicating schedules and expectations for the deal. You want Wall Street efficiency without Wall Street culture.
In Conclusion
In conclusion, “personalization” is key to building a strong deal process. However, the way you implement this strategy matters. While personalization at each step of the deal process takes time, buying a business is ultimately as much about getting one seller and broker to accept your offer as it is about building a big pipeline of options. We hope this advice helps with your search!