1st round bid - detail and level of research?

Very good question as this is IMO one key differentiating factor of funds!

A lot of the successful large and small funds know they have to put in proper work to be competitive in bidding and show commitment to the seller - remember that we are in a sellers market and the great sellers (i.e. families, founders, etc.) want to be convinced that you are a great buyer.

In my experience you have two types of extremes and lots of funds in between.

1) Indicative offer and the offer multiple is entirely based on reading the CIM, a quick model, and the experience of the investment team/partners. Maybe the internal network with senior advisors is leveraged but that’s basically it.

2) Fund conducts entire pre commercial Due Diligence (outside in) mainly focused on market and competition, often leveraging a consulting firm and including many expert interviews, sometimes spending up to 500k before making an indicative offer. This makes them experts in the topic, able to provide a very competitive bid. Some large cap firms do it like that because their deal teams will get grilled during the IC even before the indicative offer

3) In between there are lots of funds who do some in-house pre DD, and conduct at least a couple of expert calls — those will usually be key if you want to learn about the market and competitive dynamics.

I can’t stress enough that we are in a sellers market and have to do everything to differentiate ourselves from the other buyers in a competitive process for an attractive asset. A bid without at least a couple of expert calls and leveraging of other senior industry experts usually wont be successful, though many LMM firms still just produce offers based on their internal experience to save on resources.

Hope that helps