In building relationships with financial intermediaries, I find that bankers will regularly ask how often to call on DSC (or email). Obviously when representing the perfect company, a banker has no hesitation in calling PE investors, but the question is slightly different when developing an investment case, industry thesis, or buyer lists for a niche business. Nobody can be an expert on all industries or business models and DSC makes it a point to share any experience we have with intermediaries, regardless of the stage of their discussions with a company or their knowledge of an industry. While my peers may argue that this is not a good use of time, I believe it is to our benefit to help. The constant dialogue strengthens our advisors' understanding of our investment focus, criteria, and style, thus allowing them to better service our needs as a firm.
More specifically, intermediaries often ask if it is ok to bring “half-baked” ideas to the table. My response, ABSOLUTELY! It takes a lot of time to become conversant in a business model or industry. The DSC bench has over 100 years of experience managing and investing in companies, and often we can be helpful in developing ideas with our intermediaries. I got into this business because I am passionate about investing and as a result, passionate about the study of business. I thoroughly enjoy the constant dialogue generated by the M&A community and seek-out this active conversation.
There is a caveat to "absolutely". If an intermediary wants discuss a specific acquisition opportunity, we appreciate it when the banker ensures that the business fits some basic DSC investment criteria (1) $10 - $50mm of Revenue and (2) High margins / growth prospects.
There is a caveat to "absolutely". If an intermediary wants discuss a specific acquisition opportunity, we appreciate it when the banker ensures that the business fits some basic DSC investment criteria (1) $10 - $50mm of Revenue and (2) High margins / growth prospects.
So in the words of Blondie - “call me, call me, you can call me any day or night, call me…”
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Indeed. As a Managing Partner with Littlebanc Advisors, an investment banking boutique, I see nearly one hundred small growth companies a year. I believe that one of the most differentiating and powerful tools we use as bankers when evaluating companies is picking up the phone and having that dialogue with "the money". Anybody can pull industry comps and valuation data. However, learning more about the industry specifics, discussing the investment case and valuations - all on a "no names basis" allow us to get smarter and make an honest assessment. We can then come back to the managements of these companies with real conviction as to both if we can get a deal done and at what ballpark valuations. Our experiences to date with the guys at DSC have reaffirmed the effectiveness of this dialogue.
ReplyDeleteThanks Andrew for being willing to take the time to review investment opportunities and discuss your ideas on a current or prospective deal. As an intermediary, I always try to "flush out" the merits of an investment opportunity before I take a deal to an investor such as DSC.
ReplyDeleteAs Bison only works on a retained, engagement agreement basis, there is a relationship that exists between the company and Bison before an investor sees the deal. It is also important that an intermediary prepares a short but descriptive executive summary to show the investor being respectful of the investor's time.
This "prescreening" gives the investor a degree of comfort that the opportunity is (hopefully) worth a look. This thoughtful presceeening is key to a productive, credible dialogue between an intermediary and investors.