How to handle a PE Firm call (From a Boutique IB analyst's Perspective)

Fellow Monkeys, hominides, humans and the like,

I'm a boutique investment banking analyst who has a call scheduled with a Private Equity firm to talk about their investment criteria and how we might best do business with them in the future. I'm very new to banking (about 4 months in), and have a few questions on how to best handle these calls.

What I understand so far:
1.) Boutique investment banking is a small space, and these calls are more about relationship building for future busienss. Very seldom is there ever a PERFECT fit and an IOI is exchanged as soon as we hop off the phone, so these calls should be handled cordially and with the intent of expanding the firms network.

2.) Due diligence needs to be covered from the IB firms side to learn more about the PE firm, and deterine whether or not we actually want to do business with them. Questions I usually have the PE firm answer cover investment criteria, current portfolio companies, what add-ons their looking into, whether or not they're a "Fund-less" sponsor, where their capital comes from (if they have capital), and which industries they focus on.

Beyond the basic questions "fit" related questions, I would love to hear inside info from anyone (IB or PE related), on what questions they think are of particular importance during these calls, any insights into the PE firm prospecting process and their motives, or any advice on how to handle these calls like an experienced banker?

Warmest Regards,

Humble Chimp

 
Best Response

PE firms are mostly concerned with receiving deal flow. If there is a deal in the market, they want to make sure investment banks are showing it to them and the way to get on the list is to have relationships with a lot of banks.

One of the best things you can do is bring them deals that your firm is actively marketing. PE firms are often loyal to investment banks that show them a lot of deals and hence why middle-market firms with significant deal volume like HL/Blair/HW tend to do a lot of PE portfolio company sell-sides.

What you need to discern is what they are looking for. A lot of PE firms have a broad investment mandate and this can cover a ton of industries and situations. Ask them what they are currently looking for in the market and hopefully at some point your firm will be marketing a similar company and will be able to take the deal to them and show them that you are paying attention.

You can also ask about their portfolio companies and what stage of the investment cycle they are in (i.e. are they about to sell and thus would be considering investment banks or are they looking to add-on in which case you can assist in finding them potential targets).

Again gaining PE clients is a tough business to get into unless your MD has a strong prior relationship or your current shop does significant volume. However, as with all clients, PE firms appreciate when banks bring them actionable ideas and will often reward the firms that do that on a consistent basis.

 

Can confirm - you got most of it already with assessing their criteria, determining a fit, building a personal relationship, and maybe also inform them of your typical process for marketing deals and soliciting bids. Maybe also ask what are typical turn-offs (e.g., top customer concentration above XX%) for them so you can more accurately manage which deals you're showing them.

 

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