Specialization = Better Deal Flow

Our CEO Peter Lehrman spoke at the AMAA’s Fall Conference in NY (https://www.amaaonline.com/) and presented attendees with some interesting private data and recommendations regarding deal sourcing pros and cons to being a private equity generalist vs private equity specialist.

The data indicates that selection bias is a key contributor to the advantage specialist private equity firms have over generalists in sourcing more relevant deals and generating better returns. “Standing out among so many funds is critical for private equity buyers, and articulating clear, industry-specific investment strategies is an important way to develop influence and credibility with sellers,” Peter told the audience.

What we found was that generalists can cast wider nets which leads to seeing more overall deals, but firms who devote time to specializing their searches around well-researched themes or in alliance with a proven operating CEO source more relevant opportunities and waste less time combing through unattractive or irrelevant opportunities. Of course, having clear, current and accessible investment strategies benefits investment bankers and helps them do a much better job for their client. The data we reviewed bears this out (slide 20): investment banks are 43% more likely to receive a positive response when approaching firms who have stated interests in the appropriate categories.

Click the play button to listen to Peter’s talk, or simply browse through the slides for more details and data. Enjoy.