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Has M&A been Quarantined?

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March 19, 2020

With the World Health Organization designating the Coronavirus a pandemic and President Donald J. Trump declaring a national emergency over the contagion, dozens of business conferences across the U.S. have been suspended or canceled altogether.

From the Association of Corporate Growth's InterGrowth, to the Financial Brand Forum, the Game Developers Conference, and many more, Recode projects that the cancelation of these events will result in combined economic losses surpassing $1 billion.  

For general partners (GPs) and private companies alike, the opportunity cost of these lost networking opportunities is between five and eight percent of investor deal flow, according to industry experts.

And with broader public markets the world over sputtering to extremes unseen since the financial crisis, private equity (PE) performance in the aftermath of the 2008 downturn actually bodes well for GPs in this spiraling economic cycle. This historical indicator is flashing at a time when private markets have already been identified by The Economist as being more attractive to investors than their public counterparts.  

According to a 2015 research paper published in The Journal of Private Equity, PE portfolio companies in the UK earned 8 percent higher market share during the financial crisis and attracted roughly 6 percent more investment in the years that immediately ensued.  

M&A in a downturn

With industry conferences canceled, however, the outbreak cripples the ability of PE investors and investment bankers to source opportunities and evaluate promising targets up-close and in-person.

As such, preliminary due diligence on deals, a process that has traditionally been conducted via in-person relationship building, can no longer be conducted in the traditional way.  

Fortunately, sophisticated firms have been inadvertently preparing themselves for this black-swan event with their increasing adoption of remote-work technologies (RWT) and big data analytics tools. With the right RWT stack and information systems which you can access with a web browser business-intelligence (BI) software, PE investors and other GPs can still source quality opportunities, while simultaneously practicing healthy social-distancing protocols during the pandemic.

These tools can not only help savvy investors to continuously build their pipeline of interesting investment opportunities, but also give them a competitive advantage in a future down-market cycle that appears increasingly inevitable.  

The Biggest Conference Cancellations of Q2

Most conferences are either postponed or completely canceled. We have the following top-five conference statuses below. Please contact Sourcescrub for the complete list of conferences and their status if needed.  

While these conference disruptions put a constraint on deal-sourcing, using tools like Sourcescrub to find and engage exhibitors is still a viable sourcing strategy. In fact, being able to connect with companies, independent of a crowded conference agenda, might present a superior point of contact to develop a meaningful relationship.

For a limited time, Sourcescrub is offering access to the exhibitor list of one conference of your choice. We're doing this as a goodwill gesture for those in the deal sourcing world, who still seek to capitalize on this missed spring conference season.

Get your List Here>>

Prospecting Pointers

As investors and advisors contemplate engaging with businesses during this unique historical moment, here are a few tips on how to engage with companies the right way.

  1. Open with shared context - being able to open a phone call or email with "I'll miss you at InterGrowth" is a great way to create a shared context that is more likely to mobilize a response. Relevancy is everything to targets you may be looking to engage.  
  2. Be cognizant of the context. In normal circumstances, prospectors always need to be mindful of the context of a business, whether it be recent financing or executive hiring.  However, especially now, when many businesses are scrambling to keep operations up and running, it's critical that firms are mindful and respectful of their targets. Opening with, "How are you holding up in these difficult times", shows empathy and awareness of the uncertainty we're all experiencing.  This approach will go a long way in showing a greater sense of compassion and awareness.  
  3. Be a value-add. To the extent you have observations or data on how other companies of similar size or industry are faring at this unique moment, bring that into the conversation.  "I've talked to five companies this week that are also reevaluating their conference plans in Q2, so you're not alone."  
  4. Many businesses and executive leaders are active on social media - so make sure you're looking at what they are doing there to have situational awareness.

Sourcescrubbing Conference Contagion  

According to a Journal of Private Equity article, "private equity and venture capital funds that employ a proactive origination strategy have consistently higher returns, driven by both greater quantity and higher relevance of incoming investment opportunities."

This piece further predicted the "use of social media in particular to increase as more millennials reach decision-making roles in the investment industry."

Using Sourcescrub, PEs in search of undiscovered and privately-held gems can capitalize on market intelligence, and mine conference exhibitor data to offset the social distancing sparked by the pandemic panic.    

For a limited time, Sourcescrub is offering free samples of conference exhibitor lists for those looking to connect.

Get your List here >>

About Sourcescrub

We're building the best deal sourcing software for M&A professionals everywhere. Whether you're hunting investment targets for a PE firm, an investment bank, family office, or other institution, Sourcescrub's deal origination tools can enhance any M&A strategy.