In the M&A space, there are two things that influence how successful your portfolio is: the amount of money you’ve got available to deploy, and your deal flow.
Let’s take a closer look at how private equity (PE), venture capital (VC), business aggregators, and serial entrepreneurs increase their acquisition and investment deal flow when sourcing and buying businesses.
TL;DR:
- Deal flow is the pipeline of opportunities for acquisition and investment that flow into PE, VC, serial entrepreneurs, and business aggregators;
- Finding ways to increase your deal flow is the best way to source and secure higher-quality, sale-ready business opportunities for your portfolio;
- In this article, we look at 10 ways you can do that, including overseas deal sourcing and working with deal sourcing partners.
Let’s dive in . . .
What is Deal Flow?
Deal flow is integral to the way anyone who buys or invests in businesses finds acquisition or investment portfolio companies.
Without an actively flowing pipeline of new opportunities, VCs, PEs, aggregators, and serial entrepreneurs (whether solo or part of a group, also known as a syndicate) wouldn’t have opportunities to acquire or invest in.
There are a huge amount of acquisition and investment opportunities out there. According to the U.S. Census Bureau and SBA, there are 33+ million small and medium enterprises (SMEs) in America. Within those 33 million operating businesses, “roughly 500,000 businesses change hands each year”, based on BizBuySell.com and U.S. governmental data. And that’s only in the US. What about worldwide?
Even if we only consider the UK and Europe, given the equivalent population and economic sizes, there are probably another 500,000 opportunities up for grabs across the Atlantic.
M&A is a global sector and buyers don’t have to limit themselves to one country or region. Hence the value of establishing a multi-channel, proprietary, and non-proprietary deal flow.
Having a deal flow (also known as deal origination) is one thing, and there are a number of ways you can achieve that, as this and other articles we’ve published explain.
However, if you want higher-quality deals in your pipeline, then you could look at establishing a proprietary deal flow, as we explain in more detail here.
You can also look at sourcing more deals via non-proprietary sources (and proprietary, of course), which is what this article is about.
Why do PE, VC, Business Aggregators & Serial Entrepreneurs Need to Increase Deal Flow?
When you’ve got capital to deploy, you might hope and think that deals will simply flow your way, that they will find you.
In reality, that’s rarely the case.
If you’ve ever tried to sell a business to an actively interested purchase-ready buyer, you know how hard it is to find the right person or company interested in buying.
You will face the same challenges as a buyer, even when you’ve got a track record and capital to deploy.
With half a million businesses changing hands every year in the US alone, that’s a total addressable market of 500,000 business owners you could tap into.
Unless you’re incredibly well established the only way a large enough percentage of that market will know you exist is by creating a deal flow pipeline. You’ll probably naturally get deals flow your way through your network, word of mouth, referrals, and being plugged into a deal-sourcing ecosystem⏤brokers, partners, and online platforms.
It’s why we actively encourage buyers and investors to increase deal flow as much as they’ve got the bandwidth to handle. With a more active pipeline of deals you benefit from:
- Increased opportunities
- First-mover advantage over competitors (especially when deals are proprietary)
- A higher-quality of opportunities
- Success creates success. Winning higher-quality acquisitions will increase your portfolio value, so when you go on to sell assets that have achieved an even greater return on capital this will generate an even larger, more profitable pool of opportunities.
10 Ways to Increase M&A Deal Flow
Here are 10 ways to increase M&A deal flow using tried-and-tested methods.
- Implement your own outbound outreach campaign
As we mentioned earlier, unless you’ve got a personal or business brand that brings M&A deals your way without effort, your deal-sourcing pipeline is something you’ll have to actively build.
There are two ways to do this: Inbound and outbound.
We’ll cover two inbound approaches next.
Outbound, also known as cold outreach, is the same tactic that almost everyone in B2B sales uses at some point. Most high-growth B2B businesses, especially SaaS and service-based organizations use a constant outbound approach to ensure the pipeline never runs dry.
Despite constant debates around whether, “Does cold calling, emailing, direct messaging work?”, it’s a sales strategy that isn’t going anywhere. It’s an easy-to-scale approach, and relatively cost-effective. You can even work with partner agencies or freelancers to implement it. All you need is:
- A database of leads based on your target criteria (a few 1000 every month is ;
- An email outreach system to handle outbound contacts (it should include a number of email addresses that use variants on your core domain, to protect against potential spam penalties);
- A copywriter who can help craft and re-craft the email marketing messaging and sequences.
Allow a month for setup, and then you could soon have an outbound campaign that’s constantly and consistently generating meetings with potential M&A prospects.
- Leverage social media and thought-leadership, SEO-based content marketing
Next up is an inbound strategy.
If you’ve never done social media or thought-leadership, SEO-based content marketing (search engine optimization) then it’s worth remembering that results won’t be instant. It takes time.
It’s an investment; one that pays out with a compounding effect. The more you do, the more traffic, inbound inquiries, and M&A leads it will generate over time.
If you don’t have the time/in-house talent to implement internally then it’s worth working with a partner who can deliver the whole campaign in a done-for-you (DFY) format. Just make sure you’ve got someone who can support it internally, to sign-off on external comms before they’re published.
For M&A businesses and serial entrepreneurs looking for acquisitions and investments, we recommend:
- A thought-leadership, SEO-based content marketing campaign, consisting of at least 8 or more articles per month, published via your website and LinkedIn;
- A social media strategy, mainly LinkedIn-based for M&A/B2B engagement and interactions (with the aim of generating direct inbound leads, while being useful for supporting outbound campaigns).
If you wanted, you could drive even more traffic and engagement using PR (public relations) and link building. Combined, this will bring in the traffic and leads you need, while also establishing your business as a trusted authority and leader in this space.
- Create and launch a podcast or Newsletter (off the back of a content-based strategy)
When it comes to an inbound content marketing strategy, you either own or rent your audience. Most of us rent an audience; meaning businesses reliant on platforms such as Google, Facebook, LinkedIn, or Twitter (X) to bring in a pipeline of new web visitors ⏤ potential clients, and M&A leads.
Owning an audience is when they love what you publish so much that they want to be on your mailing list. Newsletters and podcasts are two of the most effective ways you can own an audience. Even if someone isn’t ready to sell their company one month, they might be six months later.
What’s the best way to keep them engaged?
Keep them interested. Keep producing insightful articles, or podcasts, that they read or listen to every week, two weeks, or month.
Not only that, but podcasts in particular are fantastic for lead generation. Another way to generate inbound leads and talk directly with potential M&A prospects is to create and launch a business podcast.
B2B podcasts with small and medium enterprise leaders are incredibly popular, with no signs of this popularity slowing down. According to recent research, “75% of B2B decision-makers listen to podcasts.”
Running a podcast is another area that requires an investment and probably working with an external provider. However, like thought-leadership SEO, social media marketing, and newsletters, the payoff from a podcast could be huge over time, establishing a whole new inbound channel that generates an M&A deal flow.
- Work with an off-market managed deal flow partner
There are numerous ways to build a do-it-yourself (DIY) deal flow, and we encourage every company in the M&A space to implement the most effective strategy for them.
One way to have this taken care of for you is to work with Falcon River, a best-in-class managed proprietary deal flow service, that connects qualified buyers and sellers.
We only make introductions when a potential buyer and seller look like they’d be a good fit for one another. We don’t waste anyone’s time. We actively source deals for you, giving you another channel alongside all of the options listed in this article for acquiring your own deal flow; one you can accelerate as required.
Work with Falcon River when you’re searching for new off-market acquisition deals.
- Leverage your network, connections, and partners
When you want to increase your deal flow, always start and build upon the trust you’ve already got within your own network. You might be surprised where your next acquisition comes from.
Chances are, several of your connections ⏤ regardless of how well you know someone ⏤ know a business owner who’s looking to sell. Make sure to benefit from the knowledge and introductions you can get from your networks, connections, partners, and referrals.
Within your network, you may also find vendors, freelancers, and consultant professionals who can help you grow acquisition assets once they’re in your control. Always pay it back too; help those in your network whenever you can, so that every interaction isn’t purely transactional.
- Tap into M&A, funding platforms, and online website brokerages
Although the aim should be to see deals before they go live on M&A, funding, and online sales websites, we know that isn’t always possible.
For those wanting to know more, here are the top 10 websites for those looking to buy businesses:
- Acquire.com: One of the most active and largest platform for owners looking to sell, mainly online and SaaS businesses. It’s network includes over 500K buyers and sellers. It’s free to sign-up and view listings, with price plans for serious buyers.
- Twitter (X): Although it’s a social network, it’s worth following the #BuildInPublic and related hashtags because this is often the first place a founder will announce they want to sell before taking more formal steps.
- BizBuySell: Comes with a range of tools and has around 65,000 businesses listed for sale every year.
- Flippa: Another very popular platform, with over 450,000 businesses sold through Flippa so far. It provides a range of services for buyers, and is free to start with.
- Empire Flippers: It’s a hybrid of an online marketplace and brokerage, with $500 million worth of deals done on the platform so far. It also comes with a range of tools and services for buyers and sellers.
- Niche Investor: It’s a smaller platform than others, with only 500 websites sold so far; however, it’s worth monitoring and working with to find deals before they go live.
- Motion Invest: Specifically designed for content websites, also known as niche sites, this platform boasts 99 current listings, an average multiple of x32 (sale value to ARR), and 1420 sites sold to date.
- Business Exits: This is more of a brokerage, with a niche in selling businesses in the $2M to $60M range, with 91% of deals closed in 2022, and a “total transaction volume of $315 million.”
- Latona’s: An online brokerage that comes with a listings and search tool.
- BuySellEmpire: It’s been around since 2018, making the business of buying and selling businesses easier. It comes with tools for buyers and sellers.
Whenever possible, establish relationships with listing platforms so that you can get a first look ⏤ making them part of your proprietary deal flow of off-market deals. Make sure the deals being sent match your targets. It’s no use being sent niche website deals when you’re only looking to buy SaaS or DTC websites.
Even if a proprietary off-market relationship with these platforms isn’t possible, setup alerts aligned with your acquisition criteria so that new deals flow into your deal flow software and management tools.
- Establish an overseas M&A deal flow pipeline
Providing you’ve got legal people who can help with international due diligence, then there’s no reason why you can’t source deal flow from overseas markets.
Simply apply the same acquisition criteria to deals in the countries and regions you want to focus on. Naturally, Canada and the UK are the closest and English-speaking, so that keeps things simple. Working with buyers in countries where the laws are based on the same set of principles makes a transfer of ownership easier to manage.
However, it’s worth venturing into other countries and regions, especially if you’ve got people who can make introductions and referrals whenever possible.
- Leverage insights from data analytics deal sourcing platforms and software
Thanks to AI tools and software (artificial intelligence), deal-sourcing platforms now have even more insights you can benefit from.
Simply plug-in as many sources of data as possible, such as your contacts, LinkedIn, portfolio financials and their contacts, and third-party sources, and see what your deal-sourcing platform comes up with. There could be insights, connections, and information that could be worth a fortune that would take a human analyst or consultant too long to find.
It’s worth giving AI insight tools and features a try to see what data they can generate that could play a role in your deal-sourcing pipeline.
Work with Falcon River when you’re searching for new off-market acquisition deals.
- Use private equity deal flow software tools: for PE firms
Deal flow sourcing software is a must-have when you’re building a deal flow pipeline. Private Equity (PE) firms have unique needs. It makes sense to use software that will make managing deal flow easier, while generating more insights from inbound leads and outbound campaigns.
For more information, we’ve sourced a separate list of Private Equity (PE) deal flow software here.
- VC, Business Aggregators, and Serial Entrepreneurs: Use deal flow management tools
Other businesses and investors in this space, such as serial entrepreneurs, business aggregators, and VC firms need similar tools. Anything you can plug-into your processes to make managing deal flow easier will pay off when these tools are helping you generate more deals and insights from campaign data.
Here’s our list of the best Deal Flow Management Tools for VCs, business aggregators, and serial entrepreneurs.
Key Takeaways: How to Increase Deal Flow
There are numerous ways to increase deal flow. Here are some of the best tactics you can implement:
- Create an inbound deal flow channel: thought-leadership content, social media, a newsletter, even a podcast. Bring an audience to you and keep them engaged and interested.
- Create an outbound channel: Setup the criteria you’re looking for and source potential deals from databases, listings platforms, and even social networks.
- Look overseas. You might be amazed at the deals you find abroad that others will miss because they stay within the US for new M&A opportunities.
We also recommend working with a deal-sourcing partner who will send purchase-ready acquisition targets that are the best fit for your firm.
Work with Falcon River when you’re searching for new off-market acquisition deals.
