For Acquisitive CFOs, Opportunism Isn’t Enough

We frequently hear from CFOs that when it comes to sourcing acquisitions, their strategy is to be “opportunistic.”

They don’t plan to hire a corporate development professional, whether because of budget constraints or other reasons. They are open to acquisitions should one fall into their laps, but they don’t have the time to proactively source deals given other responsibilities.

Because their company only has the capital and resources to acquire and integrate new companies on an infrequent basis, this seems like an OK strategy.

OK maybe, but not ideal.

Like any other sales or business development strategy, effective deal sourcing is all about filling out the top of the funnel. This means creating new relationships and maintaining existing ones to secure referrals and proprietary deal flow. It means staying relevant in your industry and market, and always being top of mind for potential partners. It means playing the long game and investing in marketing and BD efforts that may not result in an acquisition until years down the line.

This is true even if you only want to close one or two deals in twice as many years. Sure, opportunism will work for some CFOs — i.e., they’ll get lucky. But as the saying goes, the only sure thing about luck is that it’ll change.

Yes, you have a business to run, a team to manage, finances to keep up. These are the reasons you were hired and the main arbiters of your success or failure in your job. So to source opportunities proactively while balancing these responsibilities, you’ll need market intelligence, visibility, and a continuing stream of relationships for a relatively small investment of time and money.

How do you do this?

First, take a step back. “It’s very surprising to see how many CFOs don’t take the time to set up a game plan, because putting in a few hours of work at the outset can save you many more hours down the line,” says Charles Muhlbauer, director of business development at Axial.

Have you articulated the elements of your ideal acquisition? Do you know exactly what you’re not looking for? What are your dealbreakers? Have you examined your process at a granular level? How are your contacts organized? How many hours a week do you spend on sourcing now? How many can you afford to spend? Identify your short and long-term goals, map out your current strategy, and take action to manage your time more effectively.

“For example, tiering your current contacts is a fairly time intensive task, but it’s worth the upfront effort,” says Muhlbauer. In your CRM, classify each contact as either Tier 1, Tier 2, or Tier 3. First tier contacts send you good opportunities consistently. Tier 2 relationships send you OK opportunities frequently, or good opportunities rarely. Tier 3 relationships almost always miss the mark. “It’s important to note that name brand of the intermediary doesn’t matter nearly as much as the relationship’s value to you,” Muhlbauer says. “From your perspective, Goldman Sachs might be a Tier 3 bank, while a two-man shop could be Tier 1.”

Tiering enables you to personalize your outreach strategy for each group, and save time by only expending effort on high-quality relationships. Lower-tiered contacts can receive blast communications — marketing emails, press releases, etc. — but there’s no need to spend your limited time on direct outreach.

Investing in technology is another game-changer when it comes to more efficient deal sourcing. An up-to-date and comprehensive CRM will take time to implement but make your life much easier later on. Leveraging online deal sourcing platforms can provide constant visibility to other players in the space who are actively marketing deals. 

Purely opportunistic CFOs see the same deals as their opportunistic competitors. Online platforms make proactive sourcing possible even for the busiest CFOs, and facilitate relationships with people in new niches and at greater distances than otherwise possible. You may meet players that you would never have suspected of being a good target — e.g., a boutique banker with the deal of his lifetime — and establish relationships that lead to consistent proprietary deal flow down the line.