Source Talks ep. 23

Source Talks is a series where we discuss deal origination with PE and M&A pros, in collaboration with David M. Toll.

In this interview, David speaks with Teri Tadros, Director of Development at Frontenac, on a proactive approach to deal sourcing and how technology can be leveraged to facilitate this strategy.

Teri, start off telling us a little bit about Frontenac and the kind of investing that you do there.

So Frontenac is a Chicago based private equity firm. We focus on the lower middle market space. We cover three verticals the consumer space industrials and business services. And the companies that we are investing in are typically doing between $5 million and $20 million of EBITDA. We approach our investing in a proactive fashion. So for nearly 30 years now, we’ve been deploying a program called CEO First, where we partner with seasoned operating executives that bring a depth of operating experience – typically 20, 30 years of work within a specific market or vertical.

Sometimes they come to us, sometimes we go find them. But together we then formalize an investment thesis. And so then we take that thesis and all that work, and we go out to the market and we source proactively. We talk to all of the investment bankers that cover that specific category. We talked to the broader deal community. We talk to companies directly.

Late 2019, we partnered with an executive by the name of Bob Aikon. Bob is a 30-year food industry veteran. We built in this instance kind of a multi-pronged thesis in food and it covered a few different categories, but one of them was ingredients, things like botanicals and herbs and teas. And ultimately we found through a buy-side search, a company called Monterey Bay and Monterey Bay was a founder owned and operated processor and distributor of botanicals, herbs, essential oils, teas, and many other things. There were multiple opportunities to professionalize the business and there were multiple levers to pull to generate growth.

What role does technology play in your business development efforts there?

We leverage technology through our research. So building our thesis building target lists. And then there’s definitely other databases like SPS, for example that help guide and kind of optimize where our BD resources are getting utilized. So, you know, we use it a lot to make sure we’re getting in front of the right bankers the right lenders, the right buyers and sellers. Knowing what deals have traded, honing in on what deals might trade. So really just, you know, getting as smart as we can as we navigate and try to find the right people, the right ideas, the right investment opportunities you know, technology is core to all of that.

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