Do megafunds offer the same return on investment as say the Russell 3000 or the MSCI AC World indices? According to the WSJ from earlier this week, the creation of megafunds is tied to the plethora of capital flooding the market from alternative investors, sovereign-wealth funds, and those seeking better returns through asset class diversification. However, the size of these funds is not necessarily indicative of the high 20% or more returns expected from private equity investments. The internal rate of returns net of fees chart from Cambridge Associates is revealing in how these funds perform with respect to the public market. The results are “middling.” 

As market participation expands from more diverse investors looking to evolve their asset class coverage to include private equity,there is a unique opportunity for  middle-market M&A participants to leverage their deal community to compete in this tight ecosystem. These middle-market participants can look to  new relevant deal sources to expand their deal community or focus on their core strengths in the middle market to outperform the “middling” results of the megafunds. The power of connecting with the right individual within the M&A and PE community is incredibly lucrative, as well as a key deal sourcing tactic.

To access the most appropriate investment bankers, M&A attorneys, private equity investors, lenders, and service providers in your deal community, SPS custom designed a one-degree of separation solution to connect the M&A community through data. Capitalizing on these warm relationships and applying them to the investors or referral sources that you would like to be acquainted with is a key component to deal origination in this competitive market. Once a user identifies the relevant market participants to their strategy, SPS will determine which firms or professionals to target based on specific industries, regions, and – most importantly – deal history.

Digging deeper, by utilizing actionable-data to analyze the entire M&A market, SPS can identify which professionals you have a warm connection with. This is based on that professional’s transaction history coupled with the individuals in your professional network and their previous deal history. They say politics makes strange bedfellows, let’s see what strange relation may lead to your next closed deal. 

As dry powder continues to break records and more investors are flocking to private equity as an asset class – seeking those coveted 20% returns – middle-market M&A participants need a boost to remain competitive in this market. Leveraging your deal community is the natural approach, but the SPS Portal streamlines and updates this approach for the data-driven generation. Plus, as your relationship network matures, SPS’ ability to identify and generate warm leads to relevant professionals grows exponentially. Your community is a curation of your personal network, make use of those individuals that can point you in the direction of your next deal.

Last week’s deals today

June 17 – 21, 2019
~86 deals traded

Deal of the week

Ares Management sold its position in Smart & Final Holdings to peer-equity investor, Apollo Global Management for $1.12 billion. Centerview Partners, Citigroup, and Jefferies & Co. acted as the sell-side financial advisors for this transaction. Smart & Final is a Commerce, CA based operator of retail grocery stores.

Most active subsectors
  • IT: Software & services
  • Services: Misc., asset light
  • Industrial: Misc. equipment and products
  • Services: Staffing and human resources
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