As PE recruiting is getting underway, I've been seeing some opportunities with PE firms that do sourcing. What's your guys' take on it? Is it really that bad? Are you literally hitting the phones all day and not learning anything?
I talked to a friend and he had an interesting take on it, "I'd rather be calling CEOs than doing due diligence all day." Kind of got me thinking whereas previously I was very much against the whole sourcing model. There seems to be a lot of top notch firms that do sourcing:
"Sequoia Capital (late stage), TA Associates, Summit Partners, Bessemer Venture Partners (late stage), VantagePoint Venture Partners (late stage), Battery Ventures, Insight Venture Partners, Platinum Equity, Spectrum Equity, Technology Crossover Ventures, Pequot Ventures, Concert Capital Partners, The Carlyle Group, Updata Partners, Polaris Ventures, Menlo Ventures."
From this thread: //www.wallstreetoasis.com/forums/boston-private-equ…
Any thoughts or opinions would be appreciated, especially if you work/worked at a sourcing PE fund.
PM'ed you.
glorified telemarketer you will be. see what happens when you bait the hook with prestige?
Fairly certain Carlyle isn't nearly as heavy sourcing as the other firms you mentioned. I have several friends that work or have worked in their buyout group and do significant deal-related work. Not to say perhaps there isn't a small sourcing element at Carlyle (as there is in the associate role at nearly all funds), but it's not even close to the nearly 100% sourcing associate role at those other shops.
I just dont understand how sourcing is an effective way of identifying opps and subsequently closing deals. My thought has always been that the PE model works bc deals are sourced through partners existing relationships with MDs at IBs, contacts at other PE shop, networks with company executives, etc.
CIMs/OMs fall on my desk, not because Ive ever had to cold call a potential opp (thats what bankers and their rolodexes are for) but because weve done deals and cultivated relationships with some of the aforementioned parties.
Totally agree !
Agree. Relying on a junior-level employee for such a vital part of the process seems inefficient/ineffective to me. Feel like associates should spend more time on modeling/due diligence, but perhaps I'm off on that/it depends on how each firm functions on a daily basis.
If it doesn't work, then how do firms like Summit and TA thrive?
If you do go this route, def head to either TA/Summit/TCV, where they got the model down pat. If you look at newcomers to growth like Sequoia and other VCs that have opened growth wings (Accel, etc), they tend to pluck people from Summit etc...guys who know how to bang the phones, manage volume/quotas in terms of calls, etc...great training ground, and great platform to head to bschool if that's your cup of tea...i view this job as more 'fun' vs LBOs, but if you want to do the model/execution stuff, then go the LBO route
Summit recruited at my university. I didn't like their pay structure (very high commission based - was looking for something more stable) and wanted to take a more standard route. However, if you work for a shop that uses the sourcing model, you will develop some great communication skills, which becomes more important the more senior you become.
I spoke with a PE firm that specialises in special situations and has this kind of sourcing model. They have a sourcing team in which there are associates doing cold calling. One of the guys I met enjoyed doing this; another was initially recruited in this team and then moved to the execution team (doing the modelling and analysis once the deal is originated).
The goal of the cold calling is not to receive CIMs, but rather to have access to deals before they are “on the market” (ie. before CIMs are sent to dozens of others PEs by IBs). This does involve building relations with senior level execs and can be fun if it’s your type of thing.
If you are sector focused, you might have a strategic approach based on market research and news. Some firms just give you a list of firms/execs/numbers and you just call.
Generally, if you actually source a deal you get a bonus and the opportunity to work on the transaction.
Sourcing is awesome, separates the real players from the wanna bees...
possible to get in from pre-MBA ER? I would think so given the market research nature (above), and the access to management you get. Thoughts?
Are you guys talking about sourcing from PE firms or PE intermediaries (the guys that connect sellers with PE firms)? What is the consensus on PE intermediaries? Is an internship at one worthwhile? Will it get someone to IB or PE?
More likely however, you mean some kind of chop shop business broker, so tread carefully...
sonibubu- i second what capt k says. the pe intermediaries, if they are legit firms that can prove they did some deals and actually have PE firms in their back pocket then that could be a great learning expereience. But ask a lot of questions and see how long people have been working there. they could very well be chop shop bottom feeder, slime broker style guys that promise the world and youll never see a deal during your internship (or much of anything)... do i sound bitter?
OK, I guess to be more specific, I mean something like these guys:
http://blackmorepartnersllc.com/
Seem legit? I'm new to finance so I don't yet really understand what the role of this company would be.
thanks guys!
They're not legit at all. Do a search on the forums for them. Seems like a chop shop.
RE: Firms that do sourcing:
Sourcing does work and it does serve its purpose very well. TA and Summit have relied on proactive sourcing pretty much since their inception in the 1980s. Sourcing a proprietary deal generates a tremendous amount of value for the firm because they can generally buy a company at a discount. They are generally able to buy it before an investment bank shops it around using an auction process. A lot of solid, well-run companies aren't proactively looking for capital but they would be open to the idea at the right price with the right firm.
These firms are very entrepreneurial and the role definitely develops more soft skills than hard/modeling ones. Most associates at TA/Summit also have a very solid placement record into Harvard or Stanford w/ their Partners recommendations. The same can not be said for BB IBD analysts who later spend 2 years in middle-market PE. The mid-market PE guys have increasingly been ending up at Wharton, Chicago, Columbia, etc. in recent years because Harvard/Stanford just don't have enough room to take all of them.
Any other thoughts?
PE Sourcing - Myth of the Proprietary deal? (Originally Posted: 07/29/2013)
How difficult is it to find a proprietary deal by just scouring the internet? Given an interest in a particular sub-industry, how many companies is reasonable to expect to find in, for example, one week?
Obviously these questions may lead to nebulous answers, but any input is appreciated.
Most of our deals were sourced through bankers, industry contacts, etc. so I cannot comment that much on the whole cold-calling sourcing model. With that said, we did once have a mandate to find a particular type of company in a very specific space and we relied heavily on industry publications, expert networks, etc. in order to identify businesses that possessed the required LBO characteristics and also had owners who were interested in selling for whatever reason (succession/family planning, divorce, financial distress, etc.). I recall identifying about 5 opportunities per week that at least warranted further exploration. We did this for about a year while also using our more traditional/direct sourcing route (ie seeing deal flow from banks) and ended up not finding anything. I really do not think that proprietary deals exist except maybe in the small to lower middle market space where things are much tougher to monitor. Most companies that are looking to sell often want as much participation as possible in an effort to drive up the sale price.
Interested to hear from someone who has worked in a place that uses a cold calling sourcing model.
Proprietary sourcing of deal typically comes through a very well connected and well respected senior advisor or partner at a PE firm. Typically these guys have clout and a network that allow them to be the first call from companies, entrepreneurs and board members and get them access to deal that others may not get a look at until its turned down by this guy, for whatever reason.
If you think proprietary deal sourcing comes from google searches and cap iq screens, that's not the case.
You won't find a deal by just surfing the web. There are various groups on LinkedIN for example, which claim to offer this possibility, but I never saw anything materialize out of this.
However, you can use Google or other online databases and networks to source proprietary deals. We do this a lot at my fund, and it has given us access to many deals, that most advisers or intermediaries wouldn't even get their hands on.
I recently closed my first proprietary deal. Was scoping the space (niche tech space) and connected with the entrepreneur over LinkedIn. Then met
congrats bro :)
I don't get how TA & Summit call up startup's scavenging for guidance & don't get anything other than "What the fuck's a CAPEX? If you need guidance I'd suggest a sensai," *[note:actual startup founders response to an associate at TA].
I feel like this business model is on borrowed time or have to formally renounce their intentions as a "VC". The multi MM seed rounds aren't getting done anymore, & if they are the founders are pretty savy. There's tons of great startups (w/ programs like techstars & Y-Com) but they're about 3-5 yrs away from having investor relations so don't know what there is to model.
PE deal sourcing question/example (Originally Posted: 03/10/2009)
So I work at a small PE firm and have a potential deal idea, but for a number of reasons, I don't want to approach anybody within my company about it until I know if there is some remote chance it could happen. The situation is that I know of a distressed asset (relatively small) with one main lender to the company, and I want to reach out to the lender to see if there could be a deal to be done. While I don't know much at all about the company b/c there isnt much information to be found, I do think it would be an attractive deal to us, and assume the lender may be getting worried about their loan.
Can some of you PE guys walk me through a few things: When I call the lender, how would I start and conduct the call? Should I outright state my attention? What would your objectives be? How would you gauge the interest of the other party?
Thanks for your help everybody. every detail helps... I want to make the initial call, but have no idea how to do it.
I come from a real estate brokerage/private equity background. I'm not sure how you are involved with the asset you're describing. If you know the owner, contact him to get an introduction to the lender. Otherwise, just call up the lender and ask about the asset, and tell them you might have an interest in buying it. There is nothing to hurt about showing your interest in buying it. If the lender is not willing to unload it, then there is no deal prospect. Of course you want to say it carefully when you are showing your interest; don't say anything like you are targeting high returns and want big discount. Ask what the story is about the asset and tell them you want to take a look (in the financials).
I only have similar experiences in real estate so I can't tell for other types of assets, though I would imagine they are similar.
Also, a deal prospect is only a deal prospect. Call right away.
Hi there - interested in TA Associates. Does anyone have info on the HK office?
Sourcing (Originally Posted: 12/01/2010)
So... sourcing. I know what it is on the surface - cold-calling CEOs and other senior management at potential targets, basically selling your firm, but how does one go about it? i.e. does your firm have a list of companies to call and you just run through the list? Or is part of your role as a sourcer to create your own leads and call those companies on your own?
And as a sourcer, are you selling your firm's abilities and expertise as, say, a growth equity investor, to the potential target to hopefully allow your firm to invest some growth capital in the company for (1) an equity stake, (2) a board seat? I've operated on the assumption that the aforementioned is true, please correct me if I'm wrong.
Finally, anyone with experience cold-calling - what are your thoughts and how was your experience?
Thanks.
Newbie sourcing deals (Originally Posted: 04/11/2007)
I recently interviewed with a small PE firm (10 employees). The job has been described as mostly sourcing deals until you can land a client, at which time I'll be involved with execution. I am also interviewing for a similar position at a boutique I bank.
I have some finance experience, but no direct PE experience. Is this legitamite? Does anyone else have experience with sourcing deals from an almost entry level role? And how exactly does one source these deals?
*I posted this in the PE section earlier, but thought it might be worth a repost here b/c it'll get more views and it's relevant
It's basically a cold calling job. This isn't legitimate in my opinion, it's essentially a eat what you kill type job. I strongly recommend not taking it no matter what your career goals are.
PM me if you're interested in a detailed description.
Yup, sounds like cold calling.
Thanks for the responses guys, greatly appreciated. I have to agree that it will be round the clock cold calling for a long period of time. But for someone having trouble getting into a BB analyst program, wouldn't that be a good first step? Has anyone here worked in a firm like this that can give a first-hand evaluation of the experience?
any job that involves sitting at a desk cold-calling as an entry position has nothing to do with investment banking or private equity.
All I can say is run (unless you like getting hung up on by receptionists). I interned at a place like this sophomore year just to get some finance experience--worst.job.ever. I think youd be better off at a MM bank (or PWM if you cant get into ibanking)
PE Deal Sourcing (Originally Posted: 10/21/2011)
Did a quick search, couldn't find much, primarily b/c I don't know enough about what I'm talking about. Which sources do you guys use to find deals? I have a chance to assist a local shop and I want to make the best of this opportunity. Let me know if any details are needed.
Back at DLJ Merchant Banking I had the luxury of focusing on public companies to take private, so we'd screen FactSet data. But that's a tough way to make a living, and n/a for smaller/private deals. The real trick is to source private company deals that are proprietary, meaning you didn't just get handed an auction book.
The best proprietary deals happen when someone connects the dots to tie together a willing seller/issuer, management talent, capital sources, and execution capability.
Most business owners who might eye an exit or other deal don't list their business for sale. (Just like most people who'd consider leaving their job for a better one don't call a headhunter). It's more subtle. It depends... Who's involved... Who's got the missing pieces? And that' opens the door for proprietary deal sourcing.
After leaving FactSet (to whom I sold my last business, DealMaven), my partners and I put a lot of thought into how to help with the subtleties of the proprietary deal-sourcing challenge. There's a ton of noise out there when it comes to sourcing deal ideas (as anyone who signs up for deal-related LinkedIn discussion groups will quickly discover). And so we set up www.opspark.com (just launched) so people with verified credentials (P/E investors, senior executives, broker-dealers, etc.) can exchange information about their business needs. Each individual can define his/her own velvet rope based on what matters to them. And you don't have to have all the pieces toward a deal; just a couple key ingredients (as is often the case for independent sponsors). In turn, you can customize alerts for opportunities meeting your criteria.
Would love to hear from monkeys on additional ideas for proprietary deal sourcing!
Good luck.
-- Vince
Sourcing PE deals (Originally Posted: 06/03/2010)
For those who have experience in private equity, I would appreciate any high level insight into the following processes.
How do you guys go about in sourcing deals? What steps do you take? Do you take a more top-down or bottom-up approach? What tools do you use to help screen? (Capiq, Thomson, bloomberg?). Speak with bankers and company execs? Which method is best?
Once you find a few interesting companies, what metrics or characteristics do you look for? What would you look at to gain a surface level of understanding about the deal and what deeper analysis would you use in order to move forward? What would eventually make a deal not worth pursuing? What are some reasons the deals you have worked on in the past have gone bust?
On the operational side, for those who have experience, what issues do junior members work on primarily with the portfolio companies. What kind of support work would you do? (marketing/advertising, etc?) What role would you take? Do you take leadership in any of the projects you have worked on?
Thanks!
Dolor quia nesciunt ab commodi incidunt accusamus aut. Corporis id est deserunt rerum voluptatem.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Praesentium voluptatum et suscipit ipsa unde numquam. Quibusdam qui sapiente quaerat rerum quo. Eligendi et ab tempora possimus non est impedit quia.
Ea sed et sunt possimus animi. Labore tempore fugit aut consequuntur vel delectus sunt. Sint qui fuga voluptas maiores est.
Sed voluptate est esse assumenda consequatur eum. Et quod corporis dolorum repellat.
Nesciunt ut accusamus tenetur excepturi sed minima quam adipisci. Quia nulla expedita excepturi enim dolores voluptate. Aut natus aliquid sed et laborum et quod. Quidem ullam eos et natus ducimus.
Optio voluptatum consequatur ex quia minus nulla. Ab maxime autem voluptatem omnis eos. Nobis qui enim nihil voluptatem in et. Aut ullam nihil nisi. Nihil omnis sed eos placeat. Fugit earum rerum dicta repudiandae velit non voluptas. Illo explicabo odit iure delectus unde.
Voluptatum fugiat beatae non. Et corporis pariatur vel autem. Ratione atque odit et voluptate provident aut voluptates non. Dolor officiis corporis culpa beatae aut nulla nihil. Similique exercitationem ex ut fuga. Dolor provident dicta nobis enim qui recusandae.