Private Equity firms see the development of personal relationships as key to deal flow
23 June 2016
Private Equity (PE) firms are competing more and more on the relationships and the value add they can bring. By being creative with deal structuring, demonstrating a deep understanding of the target business, they are highlighting the potential areas in which the PE house can add value to the management team’s strategy, and this is proving key to winning deals.
With the current competitive nature of the market, there is a drive towards securing off market deals away from competitive processes. Building a relationship with management teams in advance of any potential deal also helps build trust between the target and investor. There are still a number of sellers who do not wish to see their life’s work go to the competition and can still command good multiples by selling it to a financial institution, complete with management.
Furthermore, PE houses are less willing to be dragged through multiple party auctions and prefer to develop their own relationships as the main driver for winning a mandate which comes down to personal chemistry. While it will not bridge a large differential in price, it can sometimes be the element that tips the balance.