Large deals announced this week

It was announced this week that Microsoft Corp. will purchase GitHub Inc. for an estimated $7.5 billion in stock. GitHub is a popular service that enables software developers and coders to collaborate. This acquisition is expected to close by the end of this year.

What’s going on with private equity deal logs?

Per SPS Data, the number of deals a sponsor investor has seen is steadily ticking up in the last four quarters, with Q1 2018 surpassing previous high points. As sponsors review and log more deals, how can investors ensure that the deals they are reviewing will actually trade?

Alternative sourcing strategies

A recent article in the UK’s Financial News illustrates how overheated investors feel the US buyout market is at the moment. Alternative sourcing strategies offer investors a unique twist on the deal origination process to combat this heated market. Many investors have already included various alternative tactics into their strategy to deploy capital on the right transactions. These strategies include direct calling to business owners to avoid intermediated processes, co-investments with peer sponsors, as well as sourcing deals from non-traditional advisors.

Let’s review two alternative sourcing strategies that can help elevate the percentage of deals in your log that actually trade.

Get ready for the harvest

This month, SPS will be unveiling its Harvest Report. It’s actionable and data-driven – two things SPS is built on. For those who aren’t in the know, it’s an annual customized report detailing all sponsor portfolio companies that may be ready for exit. It is a valuable, alternative origination resource to proactively target relevant companies that may be ready to sell in the near term.

Once the report is completed, there will be a lot of information to share including statistics on the industries, size ranges, and locations that these deals fall within. There will also be an update to the June 2017 Harvest Report, including how many deals in the previous iteration have since traded.

Mining a deal pipeline

What about mining broken deal data? It is possible that an internal pipeline holds the key to a few deals that haven’t traded. The upside to this alternative strategy? These transactions have been previously vetted and offers an opportunity to transform a historical pipeline into an active alternative source for deal flow.

Pipelines are teeming with broken processes and transactions that have not yet traded. Cross-referencing an internal pipeline with SPS market data, users can effortlessly ascertain which deals in their pipeline traded and which deals are still available. A cultivated and well-maintained pipeline exhumes potential opportunities to grow a fund’s portfolio. In fact, a recent client exclaimed that their current alternative approach involves sourcing up to 20% of their deals through broken processes. Now, that is truly an actionable and data-drive approach!

In this data-driven age and business development gadgets galore, there are tremendous opportunities to source quality deals using alternative strategies. The SPS Harvest Report and mining internal deal pipelines are available to give investors a chance to outperform the competition, and ensure that an investor’s valuable time is spent reviewing actionable deals.

How many of the deals that you log actually trade?

 

 

Last week’s deals today

May 28 – June 1, 2018

~108 deals traded!

Deal of the week

Private Equity firm TPG Capital sold The Warranty Group to the strategic investor Assurant last week. The deal transacted was for $2.5 billion. UBS acted as the sell-side advisor.

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Photo by Andres Carreno on Unsplash.

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