For more than a year, the Source, among many other publications and news outlets, has reported extensively on the challenging and competitive market that deal originators are confronting. As valuations continue to skyrocket, there is still an astronomical amount of dry powder on the sidelines waiting to be deployed. To combat this market, and hit the ground running after Labor Day to close the fourth quarter strong, consider alternative sourcing strategies. In a post earlier this year, SPS discusses applications and strategies surrounding alternative sourcing practices, and with the summer lull in full swing, it’s a great time to consider these options.
Examples of alternative sourcing strategies that deal originators can employ?
Behold the release of the July 2018 edition of the SPS Harvest Report earlier this month! This report is a powerful resource to proactively target relevant companies that may be in a position to sell in the near term, as well as a unique means to source quieter deals before they hit the market. Each Harvest Report is tailored to the user’s specific investment criteria and details all PE portfolio companies that may be ready for exit. In accordance with the 2017 edition, the 2018 edition also features the activity that has taken place in the last six months.
The 2018 Harvest Report
Based on this year’s Harvest, there are 5,300 sponsor platforms originally acquired between 3 – 7 years ago, that are potentially ready to exit; 29% of these platforms were originally acquired in 2015. Furthermore, 57% of these investments were in the sub $50 MM EV range, with another 31% in the $50 – $250 MM EV range. Lastly, nearly 300 sponsored platforms have already traded since the November 2017 refresh.
Filtering these 5,000+ platform investments for those deals that fit your criteria and strategy can help build out proactive alternative sourcing strategies in several key ways, particularly:
- Proactive management team engagement, in anticipation of future trades
- Opportunistic minority investments
- Targeted “bargain hunting” of ’11-’12 vintage companies
- Direct calling for advisors seeking sell-side opportunities
The Harvest is chock-full of data on these investments, including statistics on the industries, transaction size ranges, and deal-specific locations. Even more interesting, the Harvest has detailed information on which sponsors or investors currently hold these investments – perhaps this is another unique sourcing strategy – direct calling to owners. Let SPS and its Harvest Report help you to source your next deal, and ultimately increase your fund’s overall performance.
For a full preview of these firms, find a summary of the 2018 Harvest here, or give us a call.