Source Talks is a series where we discuss deal origination with PE and M&A pros, in collaboration with David M. Toll of Private Equity Career News.
In part one of a two-part interview, we speak with Scott Estill, Managing Partner at Lancor about the firm’s traditional search process and the Lancor Advisory Business’s (LAB) ability to work with private equity firms and find angles on opportunities before they buy them to sharpen the aperture.
Stay tuned for part 2 in the upcoming weeks to learn more about Lancor’s executive search and advisory business framework!
Scott, tell us about Lancor and the kinds of searches that you conduct for private equity firms and their portfolio companies.
Half the business that we work on is traditional search, and it looks like traditional search. We do 120 C-suite executive searches per year for private equity firms. People know what that is because it serves a need, right? We need a CEO or CFO, and we put them into the role. And that’s what we call reactive. The other part of our business that’s much more innovative is more proactive, and that stems from my career or misspent youth as an investment banker for a long time, realizing that two companies, same industry, same size. Why is one a five-bagger and one a zero? If you do the math and a regression on that, it’s almost always about the operations and executives’ ability to pivot and transition during an ownership period. So that second part of the business, which again, we call the Lancor Advisory Business, the LAB, works with private equity firms to find angles on opportunities before they buy them to sharpen the aperture. So, we’ll say to an executive, (we know them from our search business and different things we do). You are running this business, you used to run that business, so you’re not conflicted when we talk about opportunities that are similar to your former firm. And we say if you knew then what you know now, what would you do with this business? What are the two or three pillars in this investment thesis? And that’s what the LAB does. We work with PE firms, where we bring them ideas and executives with deal angles and we’re leveraging that executive’s ability from historic muscle memory and scar tissue to understand what to do with the business.
Scott, tell us about a recent example of how you actually helped a PE firm find a deal.
A quick example is a private equity firm calls up and says, hey, we’re thinking about buying this fire and life safety business, Scott, should we? And we say maybe. So, we introduce them to three or four people that grew up in that sub, sub, sub-sector of business services, understand private equity and the advice that the PE firm got in this particular case, as it often is in M&A. No, the juice is not worth the squeeze.
Tell us about the role that technology plays in your operations there.
For us, we use lots of third-party resources, companies like SPS, where you’re saying, if we’re going to buy this business and have this platform, how do we think about the add-ons and the tuck-ins and having some of those companies be precise about, well, if we do A, what are our options? Are there 10, are there 20, are there 30 opportunities for us to add on here? Or are there 300? One’s not necessarily better than the other. It depends, but obviously the bigger the opportunity set for you to deploy capital the more likely it is you’re going to be excited to do that.
