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Bake-offs and Beauty Contests

Certain picky and select private equity groups are apt to say, “we do not do M&A auctions or competitive bid situations on any of the deals in which we invest.” Put succinctly, such groups want strictly proprietary deals and do not wish to overpay.

I get it. If I ran a private equity group with access to enough dealflow to meet my investment mandate, then I too would be so disciplined. Unfortunately, in today’s market where in-general quality dealflow is short supply, there are fewer and fewer truly off-market, proprietary deals. The best deals always have multiple players at least entertaining the idea of moving forward with an offer. It is unfortunately a “pay-to-play” world out there.

Similarly, sell-side investment bankers are in a similar situation. On the best deals, we rarely have proprietary in-roads with the would-be sellers. In most cases, we are participating in bake-offs and beauty contests, sometimes with some of the most well-known middle-market players in a given market niche and even some good local boutiques, depending on the location of the company in question.

I hate competition as much as our PEG counterparts. It runs contrary to a blue-ocean strategy. Competition increases the work and stress of the pre-pitch phase. Fortunately, competition does have a few perks. First, it hones your pitching skills. I am not in the business of pitching to lose or just to have an educational experience. I am in the business of winning. But, you can always use each beauty contest as a learning experience. Second, bake-offs discpiline the dealmaker. It means we have to show our cards and our ability to get a deal done. It requires more pre-pitch preparation including valuation analysis, industry overview details, comparable transactions analysis and a quality pre-pitch pitchbook. It’s not a perk for the dealmaker, but it keeps investment bankers at the top of their game.

Finally, and most importantly, you miss 100% of the shots you don’t take. In today’s world, failing to compete is a quitters strategy.

We would love the opportunity to be invited to your bake-off when your deal is ripe and ready.

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Nate Nead

Nate Nead

Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC, a middle-marketing M&A and capital advisory firm. Nate works with corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He holds Series 79, 82 & 63 FINRA licenses and has facilitated numerous successful engagements across various verticals. Four Points Capital Partners, LLC a member of FINRA and SIPC. Nate resides in Seattle, Washington. Check the background of this Broker-Dealer and its registered investment professionals on FINRA's BrokerCheck.
Nate Nead

Latest posts by Nate Nead (see all)

  • Physician Practice Acquisitions: A Primer on Hospital & Private Equity Consolidation - October 24, 2019
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Nate Nead
Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC, a middle-marketing M&A and capital advisory firm. Nate works with corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He holds Series 79, 82 & 63 FINRA licenses and has facilitated numerous successful engagements across various verticals. Four Points Capital Partners, LLC a member of FINRA and SIPC. Nate resides in Seattle, Washington. Check the background of this investment professional on FINRA's BrokerCheck.

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This does not constitute an offer to sell or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of a final private placement offering memorandum and subscription agreement, and will be subject to the terms and conditions and risks delivered in such documents.

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