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High Road Capital Partners Keynote @ Deal Sourcing Conference
How to Win:
The Five S’s of Deal Sourcing
           Robert J. Fitzsimmons
 Managing Partner, High Road Capital Partners
          The Capital Roundtable
               May 26, 2011
Why is Deal Sourcing Important
• Large inefficient market (11,000 deals in
  Large,                    (11 000
  2010)
• Quality versus quantity versus probability
• One deal a year can be the difference between
  top quartile and back of the pack
           il    db k f h         k
• Back end is useless without the front end
• Investment strategy drives sourcing strategy
The Five S s of Deal Sourcing
              S’s
•   Sources
•   Strategies
•   Signature
    Si
•   Spreading the word
•   Statistics
Sources
•   Companies
•   Owners
•   Intermediaries
           di i
•   Advisors
•   Deal aggregation websites
•   Fundless sponsors
•   Friends & family
Companies
Revenues         Total Number     S Corp   C Corp
$10 – 50 mm            126,228    73,682   52,546
$50 – 100 mm            16,517
                          ,
$100 – 250 mm             9,695
$250 + mm                 7,485


50 mm +                 33,697    14,192   19,505


     Source: IRS data, 2008
Companies/Owners
– How many are relevant based on industry, size,
  profitability
– Considerations
   •   Reaching the right person
   •   Getting their attention
   •   Getting to yes
   •   Getting to a closing
Intermediaries
• Intermediaries
  – Sell-side investment bank
  – Sell side broker
    Sell-side
  – Buyside investment bank
  – B id b k
    Buyside broker
Non traditional
        Non-traditional sources
• Professionals (1.1 million attorneys, 500,000
                (1 1         attorneys 500 000
  CPA’s, 650,000 financial planners/stock
  brokers)
• Deal aggregation websites/services (a handful,
  but growing)
• Fundless sponsors (est. 100 – 200)
• Friends and family (unlimited)
Strategies
• Direct vs. indirect
         vs
• Inverse relationship between size and
  representation
• Investment strategy drives sourcing strategy
Investment Strategies
•   Value buyer
•   Buy and build
•   Cost
    C cutting/efficiency generator
             i / ffi i
•   Capital markets arbitrage
•   Family business transition
•   Turnaround
Sourcing Strategies
• Direct                • Indirect
  – Companies              –   Intermediaries
  – Owners                 –   Advisors
  – Fundless sponsors      –   Deal aggregation sites
                           –   Friends & family
Strategies
• Reputation x share of mind = deal flow
• Build reputation (signature)
  – Ni h expertise
    Niche       ti
  – Get things done
  – Easy/honorable to deal with
• Grow mind share (spread the word)
Signature
• Varies by market but you must be consistent
            market,
• What do different audiences want?
  – Companies: highest price take care of employees
                          price,
  – Owners: highest price, take care of company, help me
    achieve engagement/disengagement objective
  – Intermediaries: certainty of close, speed to close, no
    retrading, easy to deal with
  – Advisors: fit with client, easy to deal with, recognition
  – Fundless sponsor: certainty to close, no retrading
Spreading the word
•   Email
•   Phone
•   ACG/Capital
    ACG/C i l Roundtable/industry events
                        d bl /i d
•   Meetings
•   Press (press releases, interviews)
•   Social media
The Deal Flow Cycle

                  Inbound


Deal flow                    Emails
Filter                       Press releases
Completed deals              Networking
                             Calling programs
                             C lli




                  Outbound
Statistics
• Deal flow funnel/waterfall
  – Top down, bottom up


• Industry stats
  – Comparison of self to market
Keys to Success
• Consistent focused deal sourcing effort
  Consistent,
  (strategies, sources)
• The right message to the right audience
  (signature, spreading the word)
• F db k l
  Feedback loop, adjust efforts as needed
                    dj    ff          d d
  (statistics)

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High Road Capital Partners Keynote @ Deal Sourcing Conference

  • 2. How to Win: The Five S’s of Deal Sourcing Robert J. Fitzsimmons Managing Partner, High Road Capital Partners The Capital Roundtable May 26, 2011
  • 3. Why is Deal Sourcing Important • Large inefficient market (11,000 deals in Large, (11 000 2010) • Quality versus quantity versus probability • One deal a year can be the difference between top quartile and back of the pack il db k f h k • Back end is useless without the front end • Investment strategy drives sourcing strategy
  • 4. The Five S s of Deal Sourcing S’s • Sources • Strategies • Signature Si • Spreading the word • Statistics
  • 5. Sources • Companies • Owners • Intermediaries di i • Advisors • Deal aggregation websites • Fundless sponsors • Friends & family
  • 6. Companies Revenues Total Number S Corp C Corp $10 – 50 mm 126,228 73,682 52,546 $50 – 100 mm 16,517 , $100 – 250 mm 9,695 $250 + mm 7,485 50 mm + 33,697 14,192 19,505 Source: IRS data, 2008
  • 7. Companies/Owners – How many are relevant based on industry, size, profitability – Considerations • Reaching the right person • Getting their attention • Getting to yes • Getting to a closing
  • 8. Intermediaries • Intermediaries – Sell-side investment bank – Sell side broker Sell-side – Buyside investment bank – B id b k Buyside broker
  • 9. Non traditional Non-traditional sources • Professionals (1.1 million attorneys, 500,000 (1 1 attorneys 500 000 CPA’s, 650,000 financial planners/stock brokers) • Deal aggregation websites/services (a handful, but growing) • Fundless sponsors (est. 100 – 200) • Friends and family (unlimited)
  • 10. Strategies • Direct vs. indirect vs • Inverse relationship between size and representation • Investment strategy drives sourcing strategy
  • 11. Investment Strategies • Value buyer • Buy and build • Cost C cutting/efficiency generator i / ffi i • Capital markets arbitrage • Family business transition • Turnaround
  • 12. Sourcing Strategies • Direct • Indirect – Companies – Intermediaries – Owners – Advisors – Fundless sponsors – Deal aggregation sites – Friends & family
  • 13. Strategies • Reputation x share of mind = deal flow • Build reputation (signature) – Ni h expertise Niche ti – Get things done – Easy/honorable to deal with • Grow mind share (spread the word)
  • 14. Signature • Varies by market but you must be consistent market, • What do different audiences want? – Companies: highest price take care of employees price, – Owners: highest price, take care of company, help me achieve engagement/disengagement objective – Intermediaries: certainty of close, speed to close, no retrading, easy to deal with – Advisors: fit with client, easy to deal with, recognition – Fundless sponsor: certainty to close, no retrading
  • 15. Spreading the word • Email • Phone • ACG/Capital ACG/C i l Roundtable/industry events d bl /i d • Meetings • Press (press releases, interviews) • Social media
  • 16. The Deal Flow Cycle Inbound Deal flow Emails Filter Press releases Completed deals Networking Calling programs C lli Outbound
  • 17. Statistics • Deal flow funnel/waterfall – Top down, bottom up • Industry stats – Comparison of self to market
  • 18. Keys to Success • Consistent focused deal sourcing effort Consistent, (strategies, sources) • The right message to the right audience (signature, spreading the word) • F db k l Feedback loop, adjust efforts as needed dj ff d d (statistics)