4 Best Practices for Private Equity Firms To Secure the Best Deals

According to Bain & Co., the number of deals executed in 2020 was down by approximately 1,000 as compared to numbers from prior years. In 2021, the number of deals was still down, but the total investment value increased due to transactions having larger values.

What’s the takeaway for PE firms? The lesson is that you can avoid financial difficulties in rough economic times by improving your ability to land big deals.

How do you do that? We explain below. 

Proven Tactics for Improving Your Firm’s Performance

The last thing you want during challenging economic times is to find your firm grasping at straws as team members scramble to determine the actions or processes that will help you land much-needed large deals. You need to have a plan with proven tactics that you’re already executing before things go south.

Successful firms will tell you that these four best practices are essential:

  1. Hire and properly equip business development professionals. There’s plenty of data out there showing that growth investors with well-staffed deal sourcing teams almost always find themselves in the top quartile across stage, sector, etc. Of course, the people you add to your team must be smart, savvy, and eager to succeed. But they also need the right tools, including a PE-specific CRM like Altvia they can use to prioritize outreach activities, log proprietary information, set task reminders, etc.
  2. Leverage the latest data analytics technology. PE-focused solutions can turn data into easily digested visuals your team can use to target companies that fit your thesis. Spotting companies that are outperforming expectations before your competitors do is a great way to get ahead. You’ve got to have tools that enable you to “hear” the buzz a company is generating before others do. That gives you a head start in determining if they represent a valuable opportunity.
  3. Stay top-of-mind with business development reps. This doesn’t have to mean costly day-long, in-person meetings. Simply sending a weekly or monthly newsletter, calling to touch base, or connecting for a quick conversation at events you’re already planning to attend can be all that’s needed to remain on someone’s radar.
  4. Segment deals into tiers. Segmentation helps ensure that your team members spend the majority of their time on the most valuable deal opportunities. You’ll still want them to put some effort into deals at every level, but they’ve got to prioritize deals with higher upsides.

An added benefit of taking these steps is that it helps build your firm’s brand. And when people start recognizing your name, you’ll find that this recognition opens doors to opportunities that were previously closed. You’ve still got to close the deal, but getting your foot in the door is the first step.

Focusing on Deal Quality vs. Quantity

Many firms find that landing a big deal is more emotionally rewarding than landing 10 smaller deals that add up to the same total deal value. That’s not surprising. You get to know the people involved, and the resulting camaraderie adds to the sense of accomplishment.

And, as noted above, developing the ability to close more significant deals can be a lifesaver when something adversely affects the PE environment and the pool of smaller opportunities quickly dries up.If you’re not yet using purpose-built solutions like our AIM CRM, you owe it to your firm to check them out. Contact us today to request an informative demo.

A traditional crm was built for general ‘customer’ scenarios

Software platforms have made the world a better place by making work a better place. Indeed the world is better off when people enjoy their jobs even marginally more, and workplace applications on big CRM platforms like Salesforce.com have done that and much more.

But the potential that platforms like these offer presents diminishing returns: once the platform provider has engineered too many industry specific components into its platform, its usefulness for other industries begins to be threatened, and with that so do the usefulness of the component tools built into the platform.

So it is with the CRM category that Salesforce.com has defined: it is generic enough to work for many industries, and yet still offers the potential for others to round off the edges and nail more vertically-oriented and extremely tailored software solutions.

Private capital markets are actually a great demonstration of this dynamic. Where generic CRM platforms simplify — appropriately so — to assume there’s a business, a customer, a sale, and service of that customer, there are a few industry-specific pieces that are missing.

Take for example, that investors become customers by investing through legal entities the GP raises. It’s a subtle but important nuance that just doesn’t make sense at a platform-as-a-service level (because it’s overly complicated for a simple one-time sale that many industries require), but which can easily be added without 10 years or software engineering. Once provided, the rest of the platform’s components become tremendously powerful again and you’re set to take over the world.

As a traditional CRM in our pillars methodology, these nuances must be present to properly account for investors in these legal entities, potential target companies and which are owned by these entities, the context of all interactions with these parties (as well as the appropriate overlap, ie co-investments), and how you’re arriving at finding these opportunities on both sides of the equation, such that you’re able to piece together what’s effective and what’s not. Not just because we say so, but because these are the very relationships and data that are key to the motivation behind a CRM in any industry.

It’s critical, too, that the valuable publicly-available information that helps to enrich CRM systems and save users painful steps of entering it themselves is fully-integrated at the platform level.

Again, look no further than the 3,000+ pre-built integrations that Salesforce.com — the creator of the CRM platform concept — has at a platform level to do so, and which only exists by way of holding just short of overly-specifying certain industry workflows that would present challenges to properly integrate.

Stakeholder reporting and communication (investor relations) draws on a range of datasets

The traditional “customer service” model of CRM systems once again makes overly-simplified assumptions about the customer relationship when applied to private capital markets.

In fifteen years I personally have yet to hear the terms “warranty” or “service call” in this market because it’s just not the same. But make no mistake, as uncomfortable as it may be to say aloud, customer service is more important now than ever and it’s constantly happening; the industry is, after all, considered to be a financial “service”.

As it turns out, that service is primarily information-based — it’s driven by data and takes the form of reports and analysis that drive decisions, and then end up again in investor-facing reports and analysis.

The foundational elements of a private capital markets CRM must be built such that they accommodate this data (like we discussed above), but so too that it can accommodate additional supporting data that investors (customers!) need in the context of service.

Oftentimes this supporting data — financial metrics and time-based values, for example — is believed not to meet the traditional definition of CRM and the natural thought is “well, better do this in Excel!”.

While I happen to believe Excel is still the greatest software application ever built, its introduction to this value chain we’ve discussed herein actually creates the problem many firms suffer from: key data needed to provide customer service (again: effectively the entirety of a firm’s reports and analysis) is now in disparate systems and detached.

Both of those dynamics are important and distinct: not only is this supplemental data disparate, but when brought together there is no logical association that can be made between the two data sets.

Allow me, then, to make the point very simply: not only can this financial and time-based value data (you may be thinking about is as “portfolio monitoring” or “accounting”) be a part of a CRM, it is arguably the most important part of a CRM because it’s at the core of what providing service to the customer entails — information that comes out of data!

Firms need a digital method to engage stakeholders (ie investor portals)

Investor portals are not new; in fact, for many of us — including myself — they conjure up horrifying nightmares in which we’re aimlessly guessing at folders to find the newest document we need.

So in lies the opportunity: not only have the portals we’ve come to hate not simplified the process of acquiring information, they’ve failed to create an entirely new experience that is “customer service” driven.

To be fair, this is not a B2C market where you’d be long out of business for not having focused on customer service and thus the customer’s technology-driven experience. But don’t expect to be around too much longer if you aren’t thinking about this shift.

Today’s institutional investors increasingly expect this same consumer-like experience, and a massive opportunity is being missed by not providing it. It’s not about providing them the experience they desire; it’s more about the ability to measure engagement that is had in return.

Put simply: what’s keeping the market from providing this experience is the availability of the information that’s required to create the service that provides the experience.

If you’ve hung in this long, you know that by focusing on your CRM, you have the data that’s required to manage the customer relationship and the technology-driven experience through which that information is shared to create a differentiated and opportunistic customer experience.