How do LMM Boutiques source M&A Deals?
Given these are on the lower end of the M&A deal sizes, what are some of the common ways that Boutique IBs source deals? I don’t imagine companies knowing boutique banks as much as they would know the MM or BB IBs.
Insights are very appreciated!
A lot of them are local and just network heavily in their respective metros to meet founders directly. For example, a small boutique out in ATL / CLT hopefully has connections among local industrials, agriculture, pipe-fitting, etc. business owners in the region who periodically look to sell out of their businesses or sell a piece off. A small boutique in Boston or San Fran probably has the same type of deal but it's more bio-tech, healthtech, tech founders. A small boutique in DC hopefully would be plugged into all of the small biz gov contractors. So on so forth.
There are actually a lot more small little ~$25M companies out there than there are mega-cap public companies so in terms of quantity, sourcing isn't much an issue. Really anyone from a rich town whose done an MBA probably knows at least a few business owners / founders with a real asset under their ownership. Founders tend to know founders too so once you do a good job for one of those types you can get a ton of referrals. Lawyers, who the economics of working with small businesses are slightly more favorable for, will also be happy to have a banker they can introduce clients to, that will consider doing a tiny little deal. A lot of small shops have awesome deal flow, the fees and deals are just pretty little.
Large BB/MM have referral divisions which depending on the LMM’s connections could feed 10MM-100MM deals into their pipeline. Referrals get small piece of the fees too.
Sorry what do you mean by the deals flowing to boutiques via MM/BB referral systems? Are you referring to M&A syndicate where the smaller boutique IB assists BB in the deal?
Big names get recognition from all different sizes of companies. But you won’t catch them doing deals where their losing money due to small size. So they have a network of LMM banks to recommend, usually based on regional coverage, experience, etc. The client then gets taken through process with LMM. BB/MM bank gets referral/finder fee as a result.
that is super insightful! Thanks a lot :)
I was at a boutique shop.
The partners literally have the top 20 players in the region on speed dial, lots of networking to get there
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