14 Sep Idiot’s Guide to Deal Marketing
Successfully marketing any deal is made much easier when the company and its track record can sell itself. If we have a scenario where we are attempting to raise capital for a pre-revenue startup, then the process becomes a bit more difficult. From marketing materials to outreach, the components of a fully-executed marketing plan for a deal can vary widely– depending on whether you are attempting to buy a business, sell your company or raise capital. The harder the sell, the better the marketing and pitch will need to be.
As investment bankers, we curate deals for company investors. That is, we don’t just take anyone on as clients, unless we have a high confidence we can complete a deal satisfactorily. This is especially true for raising capital where the probability of success is much lower than a sell-side engagement. When it comes to taking your deal to market, there are several standard action items that fit into the pre-pitch, pitch and post-pitch buckets. Most deal marketing items are found in the pitch and pre-pitch buckets, with the bulk of negotiation and other difficult processes to be found in the post-pitch phase. From a time and project management perspective the preparation and planning phase is one of the biggest bottlenecks on the Gantt chart, taking up the bulk of the allotted time for completing the deal. Of the four items that follow, the first three involve deal prep. The final, important step of investor or buyer outreach, while less time-consuming is at the heart of execution. Without further adieu.
Your pitchbook or Confidential Information Memorandum (CIM) is the document used to sell your offering. It includes all the relevant details about the business including historical and proforma financial statements, bios on company management, major customers, industry overview and other company details which any sophisticated or institutional investor would like to see prior to investing or acquiring the business.
The data should obviously be free from error, but it’s sometimes helpful to get a graphic designer to help spruce up the book. A slog of boring and dry business descriptions and legalese can get cause a potential investor to lose sight of the quality of the offering. An entire treatise could be devoted to creating a proper book. Just about any quality MBA can perform this function well.
Even easier than the pitchbook is the confidential teaser. The teaser should be like a mini-skirt. Long enough to cover the essentials, but short enough to keep things interesting. The teaser typically provides a smoothed historical and proforma snapshot of the business as well as a brief, but very high-level description of the business. A generic teaser should be enough to entice any potential buyer or investor to want to execute a confidentiality agreement to view more. Keeping the business confidential before selling is an absolute necessity.
Perhaps the most important in the deal marketing process is the database of potential buyers and investors. Ideally this list will be as long as possible and include all relevant financial and strategic buyers. The issuer will also help to filter the list to ensure no nefarious or unwanted competitors are included. While competitors can represent a threat when it comes time to sell, they also can be some of the best buyers with a driving motivation to pay a premium, but selling to a competitor doesn’t come without its risks.
Typical deal marketing databases are a combination of:
- The investment bank’s own internal database and previous knowledge of the industry and market. This list often includes a healthy list of private equity groups, family offices and other managed funds looking to invest in private companies.
- The bank’s additional broad/deep research into the market, including SIC and NAICS codes that match the criteria of a potential buyer.
- The suggested contacts from the issuer, including those that may have already approached the company and those within the industry where the issuer thinks there may be a good fit.
- The bank would be remiss to not include a broad outreach through some of the more recognized online deal platforms, but tire-kickers abound and other networks often require more pre-qualification as to the ability to put it away.
A truly prepared dealmaker will take the time to ensure the teaser and NDA are delivered to each potential party on the list generated from the above. Luckily today’s outbound marketing tools make the tracking of receipts, bounces, views, clicks and responses extremely measurable. Additionally, some buyers are often hand-selected by both the lead investment banker and the client to ensure a copy is hand-delivered to the right rep within the firm. In many cases, this “shortlist” will include the most strategic buyers, including PEGs with a similar platform company, public companies or companies within the same vertical.
The best investment bankers are those that get on the phone and make the sale of the issuance their top priority. We’ve spoken before about pumping up demand for your business as part of the sales process. The more NDAs and books are delivered, the greater number of Letters of Intent (LOI) the company is likely to receive. More LOIs means the company is much more likely to receive a healthy premium above what a typical proprietary deal would garner.