Private equity firms are hiring more business development specialists. A recent Navatar poll discovered that four out of five firms are at least considering hiring a business development head, while around half already have a dedicated deal originator in place. What’s driving this trend?
The easy answer is that firms are turning to dedicated deal originators as the reality of increased deal competition sets in. These “professional networkers” generally source quality transactions at the top of the funnel by attending conferences and shaking hands. But there’s something new going on here. GPs, awash in new data on deal sourcing activity, also require someone to make sense of it all. And they’re turning to BD specialists to do it.
But infusing the old-school handshake model of networking with a data-driven approach is no easy task. Firms have different ideas of what deal sourcing data even is, how it should be captured, and assuming they’re thinking about the issue, how to leverage it effectively to win deals.
There are essentially two types of data analysis to consider. The first, around intermediaries, involves tracking and analyzing every deal as it moves through the pipeline, including who it was sent by and what stage of the deal acquisition process it ultimately reached. By tracking the quantity and quality of deal flow for each intermediary, BD pros can develop a sense of which bankers tend to send the best deals over time, and which bankers may need more education on their investment criteria.
The BD team may also analyze how intermediary outreach is being conducted, partially as a way to determine which modes of communication are most effective, and partially to set expectations that a certain quantity of touchpoints are expected on, say, a quarterly basis.
The second type of data analysis pertains to target company monitoring. The idea is to engage prospects through your website, newsletters, seminars, surveys and email blasts. The question is who tallies these touchpoints across services and platforms to develop a holistic sense of which target companies are most engaged with the firm’s marketing and messaging.
Likewise, when and how target companies should be engaged requires careful monitoring of their level of growth on a periodic basis, as well as other developments like new office openings and senior level hires that could serve as indicators of which direction the company is heading. In all these aspects and more, the BD specialist must use these data streams, brought together through a system like Navatar Private Equity, to direct movement at the top of the deal funnel, pushing down opportunities the deal team are most likely to close.
If the role would be a value-add to your current deal origination strategy, the answer is a little more case-specific. As learned during a recent Navatar webinar, a dedicated deal originator can present cultural challenges and require new ways of thinking. Deal partners, accustomed to originating transactions from start to close, may prefer having a psychological sense of “ownership” over the process.
Nonetheless, expect the most innovative and data-savvy deal teams to adapt. Firms are swimming in a sea of data when it comes to deal sourcing today. At a time when any competitive edge can mean the difference between landing a transaction or not, they are increasingly in need of someone who can understand and crunch the data to capture new deal origination intelligence.