“Protecting” your network
For those who have made introductions, whether on the capital side or the deal side, how have you gone about protecting your contacts to ensure you’re not cut out of the deal/flow of information.
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The only way to truly protect yourself from not getting cut out is legal agreement. I wouldn’t recommend making introductions for potential deals or capital raises without an agreement in place. You may view it as a fee generating activity and the firm may say you were just being nice. Well when you put your hand out at the end of the day for your fee, the firm can throw there hands up and say..oops, misunderstanding, we will get you on the next one. Alternatively, if you are a broker and always sending deals around, you may get the fee even without the agreement because firms want to keep seeing deal flow / equity. But it’s always sound to protect yourself - no one else will. If the firm doesn’t want to sign a legal agreement with you, that should be red flag #1 that they are not going to pay you.
Thank you! This is helpful. Candidly, I’m on the principal side and I have been selectively sharing my network with my team. I have a very strong network.
With that said; Im also gunning for a promotion. I don’t want to be seen as not a team player because I’m unwilling to open up my network….
How would you recommend I leverage my network, protect myself, but also show that the “relationship side” of deal making is one reason that I’m worthy of a promotion?
What are you trying to ‘protect’? Generally, people refer to ‘protection’ as in not getting cut from a fee. Are you just trying to say, well if I bring in something due to a relationship, I don’t want my colleagues taking point? I want to take point? If that’s what you mean, I would say it’s all internal politics. I doubt you’re going to get paid more for bringing something in, especially if you’re an analyst or associate. If your job is underwriting / acquisitions, I don’t see why they won’t keep you involved. Or just when you do bring it in, say you want to stay involved. However, if you do lending, and you bring in an equity relationship and have an investor relations team, some firms may keep you in the loop, but other firms will just say; awesome, thanks for doing your job, keep it up, but the IR team will take it from here. They will hopefully remember you used your contacts. But please give me more information on what you want ‘protection’ from. If you think you work with a bunch of as*holes, I than don’t use your contacts and save them for your next firm.
In business as in life, the rule of thumb is that if someone thinks they can fuck with you and get away with it, then they will. Bullies in high school and prison gangs adhere to the same philosophy. I know really astute independent deal makers who were royally fucked over by large p/e shops, largely because they were independent and didn't have the financial means to battle it out legally over fees (in these cases, NDAs and fee agreements were completely circumvented and the buyers still go away with it). Part of the benefit of being with a big brokerage firm is that there are ramifications and financial strength. One of the reasons I gave up on trying to bird dog deals independently, I don't have the stomach for the idea of a buyer fucking me over and then daring me to sue them. I'd likely end up arrested for assault and battery, life is too short.
Oh man, the stories I've heard about larger firms screwing large brokerage shops out of fees... Still adheres to your rule, but even the big brokerages get screwed out of fees by the even bigger firms.
I've unfortunately seen this happen. The big brokerages choose to pursue the client for the fee, not the broker. If its a large enough client, the brokerage will not pursue the fee in the hopes of keeping the relationship for future fees. It is also situational dependent though and I've unfortunately see it one too many times where the salesperson loses their fee.
The question is how strong are these relationships. Acquaintances? Buddies? What is the relationship? Who are they and where do they fit in the overall landscape? To the point made above, what is your perception of your current firm? Will they screw you? If your relationships aren't all that strong then it could just be about making the next fee.
Depending on the answers to these questions you may want to keep them private until you've sourced a deal using these relationships. That way its established where the deal came from and who holds the key.
Having fallen victim to it, as nice as your directors/superiors are, remember, there are people out there who are sensitive and do not want you to grow into the role you desire.
In short, use your intuition. What's your gut telling you? Think about how you want this to play our and manicure the events as they unfold. Pretty opaque advice but the path to victory is rarely clear.
Best of luck soldier
My market is fairly large, but still a very insular community where reputation still means a whole bunch. If you are truly adding value for a client, then they would have little incentive to fuck you over. In the instances where they do try it, you just end up biting the bullet on that one and never to business with them again. Word gets around and soon they won't get deals shown to them, nor good brokers to work with them.
On the contrary, there are plenty of folks out there trying to grab referral fees for deals they have little or no part in. They add no value and are simply leaches who deserve to be hard-balled. If aren't adding any value, then there is no value lost from pissing them off, and generally their word holds very little in the community so there is little reputational damage.
But ultimately you shouldn't be so reliant on one client that you can't cut them lose if they fuck you over. It's a scarcity mindset, where an abundance mindset works best. You should have so many other deals and so many ways you are adding value for people that they are competing to work with you. Basically provide so much value and opportunities that you don't care, and its a bigger loss to them than you.
From reading the back and fourth with pudding, it sounds like you are just trying to get credit/noticed at your current job. So, I'm offering this advice in that context, not in the "brokerage" context.....
Worry about "protecting" a network is a way to cut yourself off at the legs. It's better to just make the connections, be a team player, and let it all happen as it should. Trying to manage this as an analyst/associate is foolish, and trying to use this as leverage in your firm could royally backfire. As said, unless this is a frim of a-holes, you will get credit. The more you try and push it, the less you will get rewarded for this. Just go forth and make stuff happen, worrying about "protecting" anything will be very suboptimal.
Thanks for your reply. Respectfully; are you speaking from experience or just saying it’s generally “go along to get along?”
Maybe I’m just a skeptic, but giving my company access to something intangible like relationships without strings attached, or general verbal agreement that it will somehow benefit me and not solely the company seems like a poor decision.
And maybe that’s just the way things get done, but it seems like there’s relatively little upside to being the “connector” of the relationship/deal vs the “facilitator” of the relationship/deal
If all it gets me is a pat on the back, what’s the point?
Genuinely trying to think this through.
... You're not going to get any sort of agreement, verbal or otherwise, that bringing a relationship to the table will get you rewarded. That's not how this works... If they are truly your relationships, if you bring them to the table and aren't rewarded over time (not from the first successful deal, but as you prove you can do this more than once), then walk and take them with you. You're not losing anything by bringing the firm business if you believe in the strength of your network.
Well, in fairness, I don't know your exact situation, so my ability to give advice is limited as such. That said, I'm speaking from personal experience on both sides of the aisle (being junior offering connections, and being in the senior side where people have ability to bring their connections, my analyst literally just did this a month ago).
Sooo..... the dilemma you are describing is one sometimes known as "transactional vs. relationship oriented". Seeking agreements to benefit you explicitly is attempting to run this like a transaction, which is not often a wise place to frame things when you are employee (let alone at analyst/associate level). The relationship model is based on long-term benefit. Clearly if this "network" yields rewards for either team (your firm or the other firm), both build stronger bonds to you. Just the ability to make a connection even if no deal is on the offer, can build relationship equity.
Often, it is the analyst/associate that proves they can bring in business (or capital or whatever), gets promoted first that is the reward. Can you get some points or cash bonus for it? Maybe, depends on firm and context. That said, if an analyst or associate (or really anyone) came to and said "I can introduce so and so to you/the firm, but I want XXX in return", I would tell them not interested, go sit down. It would go over very very poorly at my current firm.
Some firms (and business models tbh) are more transactional, and this is more normal/expected, that is a contour only you can know about your firm.
Personally, I have lived my life on the relationship orientation model, I hate the transactional model (and generally just flat avoid those trying to "broker" me). It has really really helped my career. Paradoxically, it's why I spend some time on WSO giving advice for free, and almost always say yes to request to chat when private messaged. I doubt I will get any personal benefit directly (via all networking type activities, but esp. WSO), but long-term who knows. I also believe very much in the "pay it forward" model of helping, I have received a lot of help and do feel like I should help others.
Thus, I approach this from a long-term view, and frankly have done work constantly at various jobs that I didn't get paid nor directly rewarded for (not even a "pat on the back"). Am I bitter? NOPE, why? The next employer paid me much more for the skill I had proven and demonstrated that the prior one failed to compensate for (their loss). I'm kinda glad they didn't pay up to be honest, as it made it easier to move on, to way better things. So, I advice always doing what you can, not worry about getting paid directly (i.e. transactionally), it's worked for me. Hence my answer...
If your take is that you don’t want to share relationships because you aren’t going to get actual cash or a promotion, I think being in brokerage could be a better spot for you. Brokers are notorious for hoarding and not sharing relationships. There’s nothing wrong with that, but it’s how they get paid. As an employee, I think it’s best to have a sharing mindset for most things. You bring these relationships, to the table, you hopefully get promoted. If you don’t, you leave. Unless you have a contract where you get paid based on revenue that you generate or relationships you bring it, you won’t get cash. Your hope by bringing these relationships in, is that, come bonus season, you’re given some extra money. You also need to keep in mind that as an analyst, you’re generally replaceable. Maybe these relationships are huge deals, but the firm is ticking away without them, and won’t stop if you don’t provide them.
My advice, bring the relationships forward and see what happens. If you’re unhappy with the outcome, leave for a new firm.
What's the concern here as a "junior" on the principal side? It's not like you're in a sales type role (i.e. brokerage / loan officer) where your network will make or break you. You make your money by being right on buying a property and generating excess returns.
And let me squash any type of this "I can bring off market deals to the table" non sense before it begins. That's just something people like to say at investment committee to push a deal through. Why would anyone leave millions on the table because your a friend? That's right, they won't.
Just thought I would comment on your off market comment - off market doesn’t always mean lower price. It just means less competition, generally. I’ve personally brought in two ‘off market’ deals through my network to investment committee, our prices were above market but met the needs of the firm, and so we green lit the bids. Transactions both fell through, but that’s a different story. But today, I would 99% of off market deals, are BS.
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