Most companies with committed resources tend to access deal flow through multiple channels. Fundamentally, three core areas tend to drive the most productive deal flow.
Once a management team has developed its acquisition strategy and identified the relevant targets, there is no substitute for networking. Spend time identifying the key contact at the target company. That person is typically either the Owner, a Board member, CEO or CFO. Then, select an internal team member to own the relationship at the target company. Generally, that involves, periodic calls and an annual visit. Many times, the annual touch point could be “behind the scenes” at an annual trade show conference. Realize that even if the target company is not ready to sell today, most companies consider strategic alternatives within a 3-5-year time span. Your ultimate goal should be to keep that target out of an auction process and make them comfortable that your company is the best owner for their business.
Advisors and Intermediaries
When most companies decide to sell, their next appointment tends to be with their accountant, attorney, banker and/or sell side advisor. Over time, acquirors are best served informing as many intermediaries as possible regarding their acquisition strategy. Maintain regular contact with these firms so your company is “top of mind” when they see something in your strike zone. For your top target companies, research public filings and press releases to identify their banking relationships. Your own banker should be able to connect you with the target company’s banker, if need be.
Even with solid networking, missing the right deal is always a risk. A potential back up is to create alerts on a number of M&A websites. Example websites include: Axial, BizBuySell, Deal Stream and Merger Market and there are many more. If you see something listed, move quickly, as the best targets tend to get multiple bids in normal markets.
Overall, the best approach is to utilize all three methods on a continuous basis. Make it part of your corporate DNA and it will help drive the right kind of deal flow to your company.