Something I've observed over the last 12-18 months on the hiring front for middle market PE firms is a relatively new position (or at least not one talked about all that much) for an internal, dedicated business development position. In the January issue of Mergers and Acquisitions magazine, Wayne Sills of executive search firm Sills Associates writes,
From 2009 to 2011, there wasn’t much new demand for business development (BD) professionals since PE fund managers had more pressing concerns with portfolio companies. However, demand for this function has picked up…and continues more descriptively about the role in saying,
Also, in most cases, the PE business development professional doesn’t get involved much past the indication of interest stage so they don’t participate in closing the deals they source.
This is a role that can generally be filled by anyone with a competency in finance and a high-level sales background as their
primary job is to fill the top of the funnel with deal flow from any number of sources; sell-side investment bankers, M&A attorneys, CPAs, brokers, etc. (not to mention the perceived holy grail, the proprietary deal). Does your fund have a dedicated
deal person?
I don’t mean to diminish this role in any way, shape or form as deal flow really is the lifeblood of a private equity fund. It’s also seriously hard work. From my basic understanding, simply keeping track of as many banking contacts, road show opportunities for trade shows to meet company reps in person, tracking deal processes, etc. is simply exhausting. It seems in years past that most deals were sourced by more senior members of the PE firms (eat what you kill) but there is definitely a shift going on to have a lower level individual take over much of this work.
What say you on the rise of the “deal guy” at a PE firm? Any of you out there doing this work that care to comment on your roles, likes/dislikes about the job are greatly appreciated. Lastly, is there a standard source to find these individuals like there is in going from sell-side IB to PE analyst/associate?
Do they get carried interest?
I've seen both. Also, might depend on how long the individual would stick around, for instance if there's a partner track to the role going forward (likely) or if it might be a 2-3 year commitment (likely not).
I think it's pretty common among the MM firms. The space has gotten so crowded and funds have so much dry powder that they are tripping over each other looking for quality deals. I would say 2 to 3 times a week a fund will reach out to my bank requesting we keep them in mind for certain types of deals.
Honestly, I think this would be one of the most fun jobs in PE to have. I'd actually take a really hard look at doing it if given the opportunity. A fair amount of work, but a great way to get out there and meet tons of interesting people and companies.
agreed - we have someone who fills this capacity and the entirety of the job is looking at opportunities and passing along the ones that make it through the smell test. and I think King is correct when saying this role is more likely at a growth fund than buyout
Isn't this the most important position within a PE fund,or even IB? I understand that business development isn't doing the analysis but they're the ones with the relationships bringing in the opportunities.
Aren't MD's at banks just doing business development? and wouldn't partners at PE firms just be doing business development by bringing in the deals for everyone else to work on?
It's less analytical work but I would imagine the guy bringing in the business should get compensated more than the guy running the numbers.
For theking and duffmt6, I would definitely agree with both posts, but what kind of expectations are firms placing on these roles to bring in deals that get closed? Can't imagine it's a cake walk. Ultra competitive environment plus a senior management team with an overbearing and stringent attitude could take a LOT of the potential fun away from this kind of work.
Yeah, it's a position with a ton of upside and a TON of potential downside.
It's the kind of role that I think would be best in a growth equity fund vs. a traditional buyout fund. If only because growth equity is a bit more specialized than traditional buyouts and seems to be less crowded, in my view. Plus, in growth equity, there is a much bigger focus on relationships and finding the right fit to help grow a business instead of just trying to get the highest multiple you can, which is more or less the only focus at this point in buyouts thanks to an incredibly over-saturated market.
Keep in mind I'm on the banking side of things so could be a bit off base here. Basically at my boutique we have a 2 person bus development team. Their job is basically to source leads for deals and it's up to the MD's to close the business. For example, they are in the process of setting up a CRM, they sound out marketing materials including research and press releases, etc. In addition to this, they basically deal with all of the bus development guys at the funds in our space. This involves face to face meetings, fund profiling, discussing port companies that might be up for sale, sending holiday gifts, etc.
I'm guessing on the PE side things are similar. Basically the BD guys are sourcing leads through various professionals/service providers (banks, wealth managers, accountants, lawyers etc.) and it's up to the execution guys to close deals. As for compensation, I wouldn't be surprised if it was structured similar to doing deal execution, with maybe slightly higher weighting toward salary versus variable comp (carry or bonus). I would say that the majority of the MM PE funds we deal with have someone at least partially dedicated to business development.
Someone correct me if I'm wrong on anything here.
I know at the AM I interned at this summer, the business developer, guy in charged of getting clients and maintaining relationships, had a base salary of $270K. He was a pretty old gentleman at around mid 50's. He was bringing in a lot of business, even during the summer, I can honestly say he brought in about a good 10-15 new accounts with at least $20M each. A large part of his job was wining and dining clients as well.
My buyout fund this summer had someone in this capacity- interestingly enough it was a much more junior person then you would expect. Like has been said, lots of upside in terms of relationship building/having the opportunity to meet A LOT of people. On the other hand, very little analytical work- basically a relationship manager
This can definitely be fulfilled by a junior person since it's more important to have a certain skill set. I know a few guys that are only a few years out of college that are pounding the phones and pavement looking to bring in the next deal. I also agree with the fact that there's a ton of upside here because certain business development skills that are needed to do the job effectively and nurtured while on the job are generally not possessed in a strong capacity by other members of a deal team that are more execution focused. That might sound like swahili to some but it's 100% true on the relationship management side v modeling and execution side. Some might argue that it's something you can't really "learn" and you either have it or you don't.
I just want to make sure any younger aspiring banking/PE guys here aren't thinking it's all partying and fun to bring in deals.
^ this. I'm almost positive you don't have carried interest and reaching partner is very unlikely. You are compensated on what you bring in, not how those opportunities fare if they progress to an actual investment. You are purely a relationship manager with no real analysis. That's not to say it's a bad position, but from what I gather (I interviewed for one of these positions) you are definitely on the periphery and purely a relationship manager.
For some reason when I first read this I thought back to "Playmakers" that used to be on HBO when one of the offensive lineman was at the strip club telling the girls that he's the problem child of the bunch, but the coach has to keep him around to protect the pretty boy quarterback.
These BD guys might be viewed as being on the periphery of the industry/their own firm but they are one of the most important positions in terms of bringing in deals. Just scan a handful of PE firm websites and see how many list individual contact info, let alone identify a dedicated deal person for intermediaries to know who to send relevant deals into. Sure many might list an email but a startling number might only show an "info@" email address on the "contact us" page.
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