The Impact of Effective Deal Sourcing Capital Roundtable Conference November 10 th , 2014
S utton Place Strategies, LLC Deal Origination Analytics™ Sutton Place Strategies is dedicated to meeting the business development needs of private equity and mezzanine firms. The firm’s core service is Deal Origination Analytics™ , which consists of a customized report package designed to quantify the addressable universe of a client’s transaction target market, measure market penetration, and serve as a road map to increase the effectiveness of a firm’s internal deal sourcing efforts. The reports are backed by proprietary data tracked on a primary basis by Sutton Place Strategies since May 2009. 2
S utton Place Strategies, LLC Presentation Materials Usage All materials in this presentation remain the intellectual property of Sutton Place Strategies, LLC (SPS). SPS grants a limited, personal, non-exclusive, non- transferable, revocable license to access, display, and use such reports and downloadable content for non-commercial purposes only. Any republication of Sutton Place Strategies reports or downloadable content must include proper citation to SPS or be explicitly approved in writing by Sutton Place Strategies’ authorized personnel prior to republication. All rights not specifically granted herein shall be reserved to SPS. 3
S utton Place Strategies, LLC LTM September 2014 Intermediary Breakdown* Cumulative # of Cumulative Firm # of deals % of total % of Total Firms # of deals % of total % of Total Houlihan Lokey 98 2.6% 2.6% 10 Completed 21-30 Deals 238 6.4% 37.8% Goldman Sachs 82 2.2% 4.8% 41 Completed 11-20 Deals 567 15.1% 53.0% J.P. Morgan Chase 68 1.8% 6.6% 7 Completed 10 Deals 70 1.9% 54.9% RBC Capital Markets 66 1.8% 8.4% 12 Completed 9 Deals 108 2.9% 57.7% Evercore Partners 60 1.6% 10.0% 9 Completed 8 Deals 72 1.9% 59.7% Morgan Stanley 60 1.6% 11.6% 23 Completed 7 Deals 161 4.3% 64.0% William Blair & Co. 59 1.6% 13.2% 21 Completed 6 Deals 126 3.4% 67.3% Raymond James 58 1.5% 14.7% 41 Completed 5 Deals 205 5.5% 72.8% Jefferies & Co. 56 1.5% 16.2% 48 Completed 4 Deals 192 5.1% 77.9% Barclays Capital 53 1.4% 17.6% 71 Completed 3 Deals 213 5.7% 83.6% Harris Williams 51 1.4% 19.0% 131 Completed 2 Deals 262 7.0% 90.6% Bank of America Merrill Lynch 49 1.3% 20.3% 351 Completed 1 Deals 351 9.4% 100.0% Moelis & Co. 48 1.3% 21.6% Total**: 3,744 100% Lincoln International 46 1.2% 22.8% Piper Jaffray & Co. 44 1.2% 24.0% Out of 787 Active Intermediaries, Sandler O'Neill & Partners 44 1.2% 25.2% 553 (70.3%) Completed Three or Citigroup 43 1.1% 26.3% Robert W. Baird 42 1.1% 27.4% Less Transactions in the LTM Lazard 39 1.0% 28.5% Generational Equity 38 1.0% 29.5% September 2014 Period Stifel, Nicolaus & Co. 38 1.0% 30.5% Credit Suisse 37 1.0% 31.5% *Based on completed PE and M&A transactions in LTM Sept 2014 $10+ MM in transaction value with intermediary identified. 4 **Total exceeds actual number of deals closed in LTM Sept 2014 due to multiple intermediaries on some transactions.
S utton Place Strategies, LLC Private Equity Deal Origination Annual Deal Flow Buy-side Brokers Direct Target Marketing Deal Sourcing 2-4 Budget Closed $200,000- Transactions $1,000,000/year Boutique Intermediaries 50 Considered Carefully (~$4,000-$20,000 spent Middle Market per relevant opportunity) Investment Banks 500 Opportunities Reviewed Typical approach to enhance deal flow is to spend additional time and money to increase opportunities reviewed 5
S utton Place Strategies, LLC Private Equity Deal Origination Annual Deal Flow Buy-side Brokers Direct Target Marketing Deal Sourcing 2- 8 Budget Closed $200,000- Transactions $1,000,000/year Boutique Intermediaries 100 Considered Carefully ( ~$2,000-$10,000 spent Middle Market per relevant opportunity) Investment Banks 500 Opportunities Reviewed Shift focus on increasing number of quality opportunities, reducing cost per relevant opportunity and: Increasing number of closed deals leading to bigger funds, or closing same number of deals while 6 increasing IRR due to higher quality selection
S utton Place Strategies, LLC Market Coverage: Sector Focused 40 Number of transactions 35 30 27 46.8% 25 20 13 8 15 9 8 8 10 12 11 5 16.3% 10 8 10 4 5 5 9 5 9 10 5 7 8 8 12 15 5 6 8 22 8 7 9 4 6 4 7 7 7 8 5 3 8 12 9 5 9 5 6 4 8 10 9 7 9 8 4 4 2 5 5 7 5 6 7 7 5 7 2 2 3 5 7 4 5 3 7 5 5 6 5 4 6 5 2 5 3 1 3 1 5 1 3 5 2 2 3 4 2 1 1 1 3 3 3 1 3 2 2 1 2 2 1 1 1 1 1 1 1 1 1 1 1 0 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Closed Lost Passed Didn't see it Rolling LTM Market Coverage 7
S utton Place Strategies, LLC Market Coverage: Quasi-Generalist 90 Number of transactions 80 70 41.9% 59 60 31.7% 50 40 46 30 24 27 20 30 23 23 25 26 20 15 22 20 13 15 22 19 23 14 25 17 23 19 22 20 18 17 15 20 27 17 12 30 24 20 20 17 19 15 15 18 8 11 14 11 14 9 5 11 15 9 10 18 12 16 11 8 12 13 11 10 8 8 9 15 10 10 12 14 10 6 12 12 10 9 5 9 8 10 9 4 10 4 6 4 7 7 8 8 4 2 1 1 5 3 4 8 8 5 5 4 4 2 1 1 2 2 4 3 3 1 2 2 1 1 3 1 1 4 4 3 4 1 2 3 3 2 3 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Closed IOI Submitted Passed Didn't see it Rolling LTM Market Coverage 8
S utton Place Strategies, LLC PE Middle Market: Deal Origination PE Deal Origination Market Coverage Statistics Top Average Max Min Quartile Market Coverage¹ 19.3% 52.2% 2.8% 39.9% 34.7% Market Coverage Boutique Intermediaries 12.8% 45.8% 1.4% Market Coverage Most Active Intermediaries 21.8% 61.4% 1.0% 46.3% Generalist PE Firms Market Coverage 17.6% 35.3% 7.4% 28.3% 31.2% Quasi-Generalist PE Firms Market Coverage 17.9% 40.5% 3.1% Sector Focused PE Firms Market Coverage 23.7% 48.2% 6.2% 37.7% Upper Middle Market PE Firms Market Coverage 38.7% 52.2% 27.6% 46.1% 21.6% Lower Middle Market PE Firms Market Coverage 8.7% 27.9% 2.8% ¹Percentage of completed PE transactions with a sell-side advisor in relevant size ranges and sectors reviewed by a PE firm. 9 *As of June 2014, based on SPS’ 87 clients that qualified for the annual Deal Origination Benchmark Report (DOBR).
S utton Place Strategies, LLC Deal Origination: LP Reporting Two Common Typical Themes from GPs to LPs Proprietary deal flow Breaking down the funnel (number of deals, IOIs submitted, closed rate, etc.) LPs Will Need More Deal flow receiving increased scrutiny for three reasons ● Everyone claiming to do a great job, who really is? ● Increased transparency and disclosure requirements; efficient way for them to check the box on diligence when it comes to deal sourcing ● Increased direct investing and co-investing; GPs with access to higher share of relevant deals are more attractive 10
S utton Place Strategies, LLC Conclusion Marketing Will Require an Increasing Portion of PE Firm’s Budget Deal origination key to unlocking value for investors Shift focus from deal volume to effectiveness Not just auctions vs. proprietary: boutique advisors Importance of the BD professional LP interest in this area is increasing 11
S utton Place Strategies, LLC Market Coverage: Sector Focused 40 Number of transactions 35 30 27 46.8% 25 20 13 8 15 9 8 8 10 12 11 5 10 8 16.3% 10 4 5 5 9 5 9 10 5 7 8 8 15 5 12 6 8 22 8 7 9 4 6 4 7 7 7 8 5 3 8 12 9 5 9 5 6 4 8 10 9 7 9 8 4 4 2 5 5 7 5 6 7 7 5 7 2 2 3 5 7 4 5 3 7 5 5 6 5 4 6 5 2 5 3 1 3 1 5 1 3 5 2 2 3 4 2 1 1 1 3 3 3 1 3 2 2 1 2 2 1 1 1 1 1 1 1 1 1 1 1 0 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Closed Lost Passed Didn't see it Rolling LTM Market Coverage 12
Recommend
More recommend
