The Dot-com Crash. The Great Recession. The COVID-19 Downturn. Since the Great Depression, the United States has experienced 14 official recessions. And according to most economists, the fifteenth is just around the corner.
With the supply chain in disarray, gas prices through the roof, and inflation at a forty-year high, private equity and investment banking firms are proceeding with caution. No one is sure what will happen next, but one thing is certain: Dealmakers must be ready to work twice as hard to achieve the same results "likely with fewer resources and higher stakes than before.
Fortunately, advancements in data and technology are helping firms prepare. Dealmakers have often been slow to complete digital transformation. But the current calm before the storm presents an opportunity to accelerate these initiatives and improve productivity and performance in a sustainable way.
Here are a few critical resource-intensive tasks that firms can re-tool to improve efficiencies and maximize results in preparation for a potential recession.
When markets slow down, so does intermediary deal flow.As firms dial up direct sourcing efforts, they'll discover that while there's an ocean of information at their fingertips, much of this data is stale,incomplete, and scattered across thousands of difficult-to-analyze sources.
This makes the sourcing process incredibly slow, labor-intensive, and inefficient. If you're focused on founder-owned businesses, the process becomes even messier. Your team can easily spend days or even weeks scrubbing the internet in search of relevant data "let alone trying to put these signals together to paint a meaningful picture.
A private company intelligence platform accelerates this workflow by gathering, cleaning, and organizing signal data from across thousands of sources. The best solutions use a mix of automation, machine learning, and knowledge workers to verify the information and keep it fresh.
Custom scoring functionality saves even more time by ensuring that firms focus their efforts on opportunities with the strongest thesis fit and highest potential. Custom scoring allows firms to take a structured, data-driven approach to deal making, enhancing efficiencies while also maximizing the impact of origination efforts.
For example, leveraging private company data and technology enabled leading firm LFM Capital to go from manually combing through conference lists for hidden gems to increasing directly sourced opportunities by 200% "all while improving productivity by 2.5x!
CRM is the heartbeat of the modern dealmaker's technology stack. It provides a centralized platform to manage deal opportunities, interactions, and activities. It helps your team members work more efficiently and collaboratively. And perhaps most important during uncertain times, it fuels the level of personalized and timely communication needed to stand out among competitors and build trusted relationships over time.
However, maximizing the ROI of your CRM investment brings its own set of challenges. CRMs are virtually useless without a consistent feed of fresh, accurate data. But manually entering this information is a tedious and error-prone process.
For instance, LFM Capital's business development (BD) team used to spend considerable time uploading and downloading lists to and from the firm's CRM. Sourcers would often jot notes down on Post-its or shoot each other quick emails rather than manually enter contact information, inadvertently creating data silos and inaccuracies.
Luckily, most of these activities can be automated. Choosing a private company intelligence platform that integrates directly with your CRM of choice makes it possible to pass data unearthed during the company sourcing and research process directly to the CRM "no manual entry required. Teams can even choose to automatically update this information on a regular basis, ultimately fueling more personalized outreach, better conversations, and faster deal flow.
Now, LFM automatically passes lead contact information, scores, and other data points from Sourcescrub to Altvia, the firm's CRM. Data is pushed back the other direction into Sourcescrub as well. Not only does this save the BD team time, but it also helps keep their data complete, accurate, and up to date for more effective outreach.
Market mapping refers to researching all of the companies in a given space and then visually plotting the entire ecosystem on a grid. The more volatile the market landscape becomes, the more critical it is to maintain an up-to-the-minute understanding of key players and happenings, and tailor investment theses accordingly. Domain expertise is also a highly valued competitive differentiator.
However, with about 30million pre-transacted companies in the market alone, the process is very time-consuming. Traditionally, dealmakers have had to rely mostly on analyst reports, Google search, PowerPoint, and spreadsheets to research, classify, and organize market maps. And while these tools still have their place in the segmenting process, there are a number of new technologies and solutions that significantly ease the pain of mapping markets for dealmakers.
A private company intelligence solution allows firms to filter lists of award winners, product reviews, or trade shows by industry and other criteria to jump start mapping exercises. Combined with a convenient extension that pulls data from the intelligence platform directly into your browser streamlines the process of reviewing candidate companies.
Industry-leading firms leverage this functionality to not only identify deals before competitors, but also surface companies with similar data signals, bubble up proprietary bootstrapped opportunities, and discover potential add-ons while pitching platform companies.
This approach enabled Datasite's VP of Corporate Development Charles Shannon to singlehandedly build a comprehensive market map in just 4 weeks. Charles' market map spans the M&A lifecycle as well as vertical and horizontal market expansion opportunities, and serves as the backbone of Datasite's highly successful M&A strategy.
Organizations everywhere are bracing for higher stress,lower budgets, and uncertain outcomes, and private equity and investment banking firms are no exception. But navigating a potential recession and the challenges it brings to an already competitive space is somewhat easier when leveraging the latest advancements in data and technology.
We recently hosted a webinar to share a 3-stage deal sourcing maturity process that offers dealmakers specific steps they can take to build sustainable advantages competitors can't match. Watch it now on-demand to learn how tech maturity can help your firm create certainty in an uncertain world.