Resources at a Smaller Firm

As an IB analyst, I'm always looking for opportunities with jumping to the buyside. As I'm working late again, I'm accessing all my resources to help formulate market slides. For some reason, it has just hit me that a smaller buyside shop (which is where I'm targeting) won't have the same kind of resources as I do now (i.e., CapIQ, Factset, ThomsonOne, etc.).

My question is the following: to understand a market, where does one get reliable and timely information? I recognize that CIMs help flesh out the market in which the target operates in (or would like to be perceived to operate in). In addition, if one were looking at public companies, how would one get research with estimates?

9 Comments
 
Best Response
futurectdocI' be surprised if they didn't have access to capIQ etc, while not cheap it isn't obscene
Actually, it is quite obscene for a lot of smaller funds in the lower-MM ($200-$500 AUM). For those guys, they likely use one or two cheaper resources (IBIS, for example), and can probably rely on the experiences of more senior professionals and those in their network, in addition to good Googling and filings of public comps. Any info in the CIM is helpful, but of course cannot be relied on.

Real market due diligence is done after the deal is under LOI and a firm like ICF or IGS is hired.

 

CapIq requires you purchase a minimum of three licenses. In my funds case we are charged $21K a year total, and it usually goes up based on inflation plus if we launch a new fund.

"If you want to succeed in this life, you need to understand that duty comes before rights and that responsibility precedes opportunity."
 

It's good to know how these data resource pricing works. Thanks for sharing your thoughts on this.

--Death, lighter than a feather; duty, heavier than a mountain
 

My two sense for a smaller shop is newer better (and less costly too) private companies databases designed for private equity professionals. I'm not endorsing any specific one, i'll just say more and more are using privco or pitchbook, which are great for doing "1s screen" on under the radar fast growing private companies that other PE firms that rely on middle market I-banks to send them deals (FYI any bank sending you an Offering Memorandum to sell a company is sending it to at least another 20 private equity firms and another 10 "strategic buyers" as well, so if it's a strong target, expect to be in a competitive bidding situation.) Databases help screen companies that aren't "for sale", export a sort-list, THEN call and inquire. The old way of just wasting time calling companies that aren't qualified is a waste of your time. And waiting for a sell-side I-bank to send you a company for sale means you're having to out bid others, reducing your ROI. So best PE deals are those you source yourself, and you you don't have to pay an arm and a leg (for our firm - roughly 15 people, it's only about 15k for privco, and I think pitchbook is 50k). I don't know pricing for others because these are the 2 we use and love them. (I think we looked into capiq maybe 5 yrs ago so not current on it but my takeaway was overpriced, like 100k/year for all 15 people, and lots of companies with no info on just their web site's "about us" language I think just entered in India is their model (giveaways were sometimes the guy in India forgot to change "we are the leading provider of.." to "they are the leading provider of" etc. So was pretty obvious they were just using the About Us. Anyway we passed and are happy with what we have. Other firms like CapIQ or probably others. We're happy with the 2 we have: privco and PB and if I had to drop one I'd rop PB as the companies are much larger and already PE owned former you can search based on "PE Owned Only" or "independent only" and we like using the latter screen.

But just like hedge funds use totally different strategies and succeed, you can master "your way" to deal-source. It is part art part science. Just don't depend and wait for banks or brokers to come calling is what I'd advise. Good luck man!

 

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