Last week, the SPS team enjoyed a group outing focused on team building exercises and games at the Chelsea Piers Connecticut in Stamford. As with many of these sorts of activities, the concepts can be applied to many areas of business and collaboration. The QUICK CARD LINE-UP is a game focused on the whole team communicating in a quickly changing environment, to test new ideas and roles with limited time and creative problem solving.

For SPS, the team developed a strategy and on the first attempt were able to achieve the objective of the game in 49 seconds out of the 2 minutes allotted. The team was feeling good about their results and were prepared to move onto the next game. Of course, the program leader then informed SPS that a prior group of 30 participants completed the game in 15 seconds! Based on this new information, SPS decided to adjust its current strategy, as it was not producing the best results. After experimenting and changing the approach, the team eventually was able to complete the game in 11 seconds – a 76% decrease in time!

On this harvest moon

This team building activity is analogous to the importance of benchmarking. Over time, the lack of reliable metrics on a firm’s deal flow performance leaves a firm to at best wonder if their strategy is producing desired results and effectively implementing a profitable strategy. Also, the lack of solid metrics leaves the firm guessing how its strategy compares with its peers and the overall market.

Without reliable benchmarks to measure a strategy, a firm may believe that their deal flow is producing the best results. Yet, this could be far from the truth. Think of the SPS team feeling satisfied with a score time of 49 seconds, and how upon hearing how their results compared, the team was able to adjust and prioritize different tactics. Actionable analytics, data, and benchmarking enables teams and firms to better understand and process the whole picture, in order to make more informed decisions and adjust accordingly. Eventually this should lead to dramatic improvements in approach and outcomes.

Comparing market coverage

Each year, SPS releases the DOBR, an annual industry standard comparing a Sponsor’s market coverage against all Sponsors and peer groups. These statistics provide detailed insight into a firm’s deal sourcing strategy and helps clients gauge their performance individually, as well as compared to the industry. In its latest iteration (Fall 2018), the DOBR revealed that PE firms see a median of 17.2% of their target market deal flow.

To offer a little perspective of the composition of the DOBR, the 2018 edition includes 138 qualified PE firms, segmented into 8 different peer groups, including: Generalist, Quasi-Generalist, Sector Focused, etc. These groups play a crucial role in contextualizing key takeaways, given the wide variety of deal sizes and industries that these firms invest in.

Just as the SPS team required outside information to complete the Quick Card Line Up effectively, the SPS DOBR provides firms with key insights to gauge how their strategy is working compared with the broader market and specified peer group. For example, the DOBR provides details and metrics for a firm’s sell-side process. This offers a PE firm unparalleled insight into their coverage of limited processes versus broad auctions, along with how to improve over time.

The DOBR also highlights industry trends, including the increasing tendency for PE firms to employ a business development professional. The 2018 DOBR is the first time that more than 50% of included firms have at least one dedicated BD professional. Moreover, the top performers in all 8-peer groups have one or more professionals focused exclusively on sourcing new deals. Without solid data and use of benchmarks, it’s hard to know how your firm compares and what trends are occurring in the market, that aren’t anecdotal, at best.

There is always room for improvement; do not settle for 49 seconds when 11 seconds is easily achievable with the right, actionable data! To learn more about the SPS outing, or the DOBR, contact us.

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.

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