The Fall has kicked off with a flurry of deals and fourth quarter activity is poised to increase rapidly, as originators and practitioners alike continue to ride the year’s momentum and capitalize on opportunities before the books are closed. The sheer volume of activity this year left many originators drinking from a fire hose, as they attempted to balance both closing and sourcing new deals – and trying to do so at a reasonable valuation. To keep momentum going in these final weeks, it is important to know who’s who in the marketplace, or who are those professionals that comprise your community of deal sources.
New financial advisors
In the first three quarters of 2018, there were 115 financial advisors new to the M&A market, i.e. these firms had not previously closed a deal. The bulk of these firms have headquarters in New York, followed by San Francisco and Chicago. More than 406 professionals advised on a deal for the first time during this nine-month period. This does not necessarily indicate that the firm that they represent is new to the M&A ecosystem, simply that their work with that firm is new.
New equity investors
There were more than 224 new equity investors in the first three quarters of 2018. Much of these newly active firms are located in New York, followed by Greenwich and Chicago. There were more than 619 new equity professionals participating on a deal. Again, this does not indicate that the firm or professional is new to M&A, just their involvement at this particular firm is new. This illustrates how transient M&A professionals can be, and why it is prudent to stay abreast of a professional’s resume. While you are down in the deal bunker, one of your most valued deal sources may have transitioned to a new firm.
Navigating new deal sources
Using the SPS Portal and other reporting features, sponsors and M&A participants alike can analyze transaction data of these newly active professionals and firms to intelligently develop a sourcing strategy. It is also worth noting that some newly active firms and professionals may not be new to the M&A community, but are new to your specific sourcing strategy.
For example, a financial intermediary that typically advises on healthcare and consumer transactions, something your firm avoids investing in, suddenly is advising on transactions in your wheelhouse, the aerospace sector. This firm will now appear in your dashboard of new deal sources in the SPS Portal. One feature to help gauge the efficacy of this new advisor to your space is the Sell-Side Process Indicator available in the SPS Portal. This indicator illustrates the type of closing process that this advisor utilizes, whether it be Limited, Moderate, or Broad.
As a sponsor, if you are looking for a more limited or quiet process, using this indicator can help to fine-tune your approach. If you are sector focused, knowing which firms and professionals are advising on deals in your space will be more critical.
Staying informed of new deal sources is inherently challenging; SPS understand this. Compiling all of this data is one thing, but then this data needs to constantly be updated, because as mentioned above, people move jobs and firms update their strategies. That is why SPS developed algorithms to do the work for you. When sifting through the relevant data, it is important to put the numbers in perspective and view new entrants in the market as a useful source of fresh deal flow, and not an overwhelming task to manage. Building early relationships with these firms could lead to long-lasting friendships and quality deal flow.
Last week’s deals today
October 15 – 19
~118 deals traded
Deal of the week
Gores Group completed its acquisition of the Mesa, AZ based Verra Mobility Corp. (fka American Traffic Solutions) from peer equity firm Platinum Equity last week. Verra Mobility is a provider of road-safety cameras and toll violations management services. Gibson Dunn & Crutcher acted as the sell-side legal advisor for this transaction.
Most active subsectors
- IT: Software & services
- Services: Misc., asset light
- Industrial: Equipment & products
- Retail: Specialty
- Services: Data & information
- Services: Data & information
Most active cities
- New York
- San Diego
- San Francisco
- Los Angeles