Bringing It All Back Home (aka Insourcing your Deal Sourcing)

So you’ve built, or are building, an internal M&A / buy-and-build team? And your industry leaders are out in the market thinking constantly about which firms could be a good fit and making  introductions? You have success stories going around the company about how the CEO / department head brought in a ‘sole-sourced’ deal with a competitor / old contact. And you’re on speed-dial for the relevant sell-side bankers. So now what?

And with all this in place, how could you possibly need an external origination advisor?

Well, there’s nothing wrong with any of the above; it’s all very positive. I’m all for transforming the corporate development practice to achieve greater internal alignment and independence. There is a long path to M&A maturity to be trod – and we’ve worked with buyers and investors from first timers to the most prolific of them all extensively - so we know about the benefits. Elsewhere I've read the masterclasses on LinkedIn of a consultancy founder telling us all how to do buyside origination by yourself (while he added a handful of companies for low cash sums as his share price soared, making a generous ROI all round).

The points in the masterclass, like the benefits of a hundred-strong corporate development team for that most prolific acquirer, are all perfectly valid.

But there are limitations.

How many times (and we’ve done over 170 origination engagements in 7 years) have our clients told us they know everyone in the market and they just need us to reach out – and we’ve found at least as many attractive, actionable targets again as they had in their ‘master list’?

How many targets have we brought to the industry titans on the weekly call that were ‘hiding in plain sight’ or that we knew were actionable, or had been, or had certain properties that didn’t show up on the website or in the joint bids or in the quarterly check-ins?

Perhaps most prevalent of all, how many targets did we show to clients who insisted on doing their own outreach legwork and could never get through because they were the competition? Or because they took their finger off the pulse a month or so into engaging with the target owners (thanks to BAU or a banked process) and then someone else picked them up? (Or they reappeared in an auction with a dubious price premium and a fraction of the time to get to know them, along with half the sector?)

Origination is one of those ‘simple but not easy’ pursuits. Central to the activity is keeping constant pressure at high volumes and superior quality across large swathes of potentially actionable targets. B2B SaaS and consultancy salespeople and managers spend their working lives telling clients to keep to their core business while they look after temporary or other-dimensional ones. But they often forget – or at certain points of the cycle find it inconvenient - to apply that to their own.

Since 2017 we’ve worked with nearly a hundred businesses at all stages of M&A evolution – from first-timers with a head of M&A and sometimes an intern, to larger firms with strong but slim departments who needed complementing in very specific ways, right up to the very largest in the world – 2 of the 3, to be precise – who valued the edge that a specialist (in buyside, for their industry) could bring to this non-core, but mission-critical activity.

And in 2024, against a somewhat humdrum backdrop in consulting and M&A, we had our best year yet, with 9 deals completed that we had originated. The median length of time between intro and close was 9 months. That's 9 months of nurturing multiple potential target relationships across different strategic plays, working through seller doubts them and negotiating against grapevine multiples and share-bearing doubters… Is that really what your internal department should - or can - spend its time on?

7 out of those 9 deals were off market (while the other two were never coming the way of our clients via the respective bankers). And another 7 out of the 9 were for our repeat clients, who had been through the experience of using an advisor and got enough value out of it the first time and more, to go with one again – and picked up that ROI of a smart, off-market transaction as a result.

Bottom line? An acquiring firm absolutely needs to develop its internal M&A capability (and we can help with that too, by the way). But in parallel, if inorganic growth is a serious part of the plan – and with the rate of innovation and war for talent and convergence of geos and IP, at least in our sectors, how can it not be, if the plan is ambitious? – then you’re likely missing out significantly if you don't take expert external advice.

Just saying! (We’re keeping busy again this year with the ones getting the smart deals done.)