11 Jan Put Away Power: A Treatise on Deal Distribution & Deal Marketing
No part in the deal process is simple. From origination to closure the process is fraught with complexity. It is one thing to be able to source opportunities, quite another to source quality deals. More difficult still is the successful closure of even the most quality opportunities, particularly those on the retail capital formation side. Under today’s new reality in business finance, the put-away power of quality deals still requires heavy human capital. We have not yet reached the point where equity shares are as easily peddled as the latest Kickstarter project. That eventuality will still require a hands-on focus toward deal closure. Compliance requirements alone are not fully to blame for the lack of speed and efficiency for completing deals (whether retail or institutional). The following includes some consideration on deal marketing and deal distribution.
(D3) Dealflow + Distribution=Dollar$
Deal makers will outline that dealflow combined with deal distribution is the virtuous cycle toward deal success. Even with the difficulties involved with quality deal origination, deal distribution is where the rubber meets the road. As a synonym to deal origination, dealflow not only includes the entire top side of the sales funnel, but what actually filters into the active deal file in the data room. Once marketing, legal and other offering docs are prepared, the modus for deal distribution and the prioritization of outreach begins.
Rifles vs. Shotguns
The decision to use a rifle vs. a shotgun is as much a strategy as it is a tactic in deal distribution. General solicitation may have opened-up thanks to the JOBS Act, but that does not mean using it as the proverbial “shotgun” for deal marketing is the right approach in every situation. To the contrary, many would submit a targeted auction can provide a great deal of value maximization without some of the cat-corralling that occurs in a generally-solicited distribution.
This remains one of the greatest juxtapositions of securities issuance. While general solicitation expands the reach, oftentimes an expanded reach hits at the wrong target. While a broad outbound exposure will market the issuance to more potential investors, the lack of targeting means unaccredited investors and investors whose full-time jobs are not linked to private securities will also see the offering. These factors not only decrease the marketing ROI, but they also can slow the speed of potential closure. In many cases, the ability for a single group or a small group to stroke a single check can significantly increase the speed of deal closure and often ups the quality and sector sophistication of the investor(s) in the deal.
Outbound Distribution Tactics
Regardless of whether an issuer is performing outreach on a retail or institutional deal, the tactics often remain the same, even while the strategy may deviate. Building a targeted list, including email, phone and other direct outreach contact information of potential investors is a key tactic for outbound outreach. However, tactics bifurcate when performing outreach to individuals and institutions. Individual investors, especially those who have not opted-in to a proprietary accredited investor database, may have CAN-SPAM or other restrictions on email and phone. Care is not only required on the outreach, but often mandated by law.Luckily today’s outbound marketing can even be enhanced by more broad-based measures such as television, radio and social media.
Unfortunately, traditional human-based blocking and tackling is still required on outbound marketing efforts. Personal relationships based on respect and trust will likely remain the best approach to successfully targeting investors for the sale of securities. The nature of this market requires that repeat business stem from the same level of trust. That is often why deal makers are typically only as good as their last deal and the most successful out there learn that they ultimately make their money from the deals they don’t do.