Source Talks ep. 29

Source Talks is a series where we discuss deal origination with expert PE and M&A pros.
In this interview, David Toll of PrivateEquityCareer.com speaks with Stuart Sitterson, Director of Business Development at Gryphon Investors on their on their operational focus and how they use data to source deals amidst a changing BD landscape.

Stuart, start off telling us a little bit about Gryphon Investors and your investment strategy there.

Gryphon Investors is a middle market private equity firm based out of San Francisco. I would say that we’re a little bit unique in that we are extremely operationally focused. We have five separate industry groups: business services, consumer healthcare, industrial growth, and software. We also have a dedicated lower-middle market fund called our Heritage fund. So we can range anywhere in size from $5 million in EBITDA, all the way up to $65 or $70 million in EBITDA.

You’ve been doing this six years now. Are there techniques of sourcing deals that maybe work six years ago that aren’t working now?

The list of investment bankers is continuously growing. The business broker world is continuously growing. But so is the buyer community. And so, a relationship I might have had five, six years ago that I thought I was the only one – they’re reaching out to, to 50, a hundred of my counterparts now. Um, so that probably doesn’t work quite as well as it used to. However, the number of sponsor-to-sponsor transactions is only increasing. We recently bought a portfolio company from a sponsor where all we used was a buy side banker. There was no intermediary selling the business.

What role does technology play in your deal origination efforts there?

I use pretty much any type of data source I can get my hands on. We have our CRM system integrated with SPS. So, I have a weekly report that says a couple of things. One, what deals were closed last week? Did we see them? Who were the intermediaries? But also, you know, what deals were closed almost three years ago that are owned by a private equity firm that are in certain industries that were focused on? I mean, so just look at the new taxonomy that SPS just revamped. That’s incredibly crucial to people that are extremely thematic in the way that we invest, as we’re diving into sub-sectors. And they’ve got 560 different sub-sectors that they analyze – that’s incredibly helpful for us.

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