PE Proprietary Deal Sourcing
Wanted to get some people’s thoughts. I’ve been in the PE Deal Sourcing space for quite some time (formerly JPM/MS IB) at a very reputable firm. Have closed many large and small proprietary deals over the last few years, and like to think I’m good at my job.
I’ve been contemplating for the last year on starting my own firm of retained buy-side deal sourcing for PE firms. Should I make the jump and do it, or stick to my very generous salary and mediocre bonuses (relative to transaction fee)?
How do you define proprietary?
Off market
If you're an ASO (you said "some time" but your title says ASO so idk) at an established firm with a good brand, have momentum/prior successes to point to, and are clipping a great salary tbh you're probably better off doing that than starting retained search firm unless you're highly specialized. At least try to negotiate a better bonus structure before considering that as an option because it's a lot harder than you think and there's a lot of competition out there (granted a lot of it isn't that impressive, but you'll need to ask yourself how you're going to be better at it). Very few reputable funds are going to be interested in retaining a 20-something who's sourcing deals after just a few years in the seat (this would be different if you're early to mid-30s and were VP+ at a big name).
Appreciate the insight, great points. I’m VP ASO tile is old
What's your bonus structure out of curiosity? If it's a reputable firm I'm hard pressed to imagine it's more mediocre than say what, 25-50bps? Is all of your bonus transaction-based or is there a discretionary component?
How are you sourcing large proprietary deals? I feel like anything remotely of scale is banked. Unless you’re shaking a divestiture loose from a corporate, I didn’t think that was possible these days.
To answer the question though, that market is pretty saturated. A few long-time BD guys have spun out to do something similar in the last several years, and you’re competing with all of the legacy buyside players and all of the new “AI” sourcing startups. I’d keep clipping coupons, climb the ladder, and wait for carry.
Surprisingly, there is a decent amount of scaled businesses ($5mm-$25mm EBITDA) that are either banked and you were very early to the process by luck to the point the potential acquirer could get a first look which they would not have previously (and the target could therefore not go to auction) or merely luck where the founders, board, exec team etc. had been contemplating a sale (banked or not) and it happens to turn in the deal. In short, of targeting and luck involved
To your point, that makes sense. Totally agree with the legacy players. The AI from what I have been hearing is good at identifying businesses, but that’s about it (for now).
Ah, that makes sense. That’s my approach as well in those situations: some of the assets I track I’m able to get us early looks / fireside chats before the process so we can start desktop work and come in hot when it launches. Or can figure out if any of my operating partners are connected to mgmt and get us intro’d that way.
Work at an evergreen software majority/buyout strategy for a large firm that would be interested; ping me if this ever of interest (burner account, not 1st year in VC)
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