How investment bankers used Affinity to navigate 2021’s M&A market

Before joining the Affinity team, Jeff he was vice president of thought leadership at HSBC Global Markets and VP, FX Risk Advisory at Wells Fargo Securities, where he helped corporates manage their fx, rate, and commodity risks with derivatives.

The investment banking market has felt the rippling effects of the M&A rebound following the massive downward turn in 2020. In 2021, banks generated 25% more mandates each month, and they nearly doubled the number of potential buyers they spoke to over 2019 and 2020 levels. While 2022 is not quite keeping pace with the levels of 2021’s recovery, the market continues to flourish. 

In Affinity’s Investment Banking Industry Benchmark report, our team drew on aggregated, anonymized data from the Affinity platform to extrapolate industry communication trends. We identified the way relationship intelligence enabled our clients to keep up with the demands in 2021’s explosion of deal activity. 

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On the surface, baseline data tells a predictable story

M&A deals close faster when there are more potential buyers in the pool. As the opportunities available increased from 2019 to 2021, the time to close arced, peaking in the anomalous year 2020, and falling in 2021 while opportunities were climbing to an apex. 

More seasoned bankers with larger networks have more reach and are able to find more potential buyers in their network. These same teams have stronger brand reputations that clients trust and are able to further decrease time to close. “This is a business where experience begets more activity in a virtuous circle,” noted Sam Britton, Co-Head of Technology, Media, and Telecom Investment Banking at Goldman Sachs. 

But communication patterns reveal counterintuitive conclusions

An analysis of Affinity’s platform data, including email communications and meeting volume, found that faster network growth actually leads to fewer opportunities per mandate and slower mandate close times. These trends together illustrate that the most successful firms don’t have to have the highest quantity of relationships, they have the best quality connections.

Investment banking teams that want to remain competitive are turning to technology like Affinity’s relationship intelligence platform to strengthen existing relationships and build better, more lucrative connections from a smaller pool of opportunities. These trends are further emphasized by evolving communication trends, including a deprioritization of email and a greater focus on meetings.

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How does email and meeting volume relate to closing mandates?

Two patterns that could have contributed to this change are the adoption of relationship intelligence to improve quality engagements and a prioritizing of face-to-face virtual meetings.

Emailing with relationship intelligence

An increase in email volume didn’t correlate with increasing potential buyers per mandate or shorter mandate close times. By focusing on quality over quantity, investment banks using Affinity’s relationship intelligence were able to send emails more efficiently, resulting in a lower volume with greater returns. 

Even though networks are growing in size, bankers are able to abandon spray-and-pray tactics and send targeted or personal emails to the most receptive people at the optimal moment.

Meeting with relationship intelligence

According to Kevin Brunner, Co-Head of Global M&A at Bank of America, “Video conferencing has made dealmaking much more efficient. You can do three or four meetings in a day without having to travel…and key decision makers [can] attend and participate.”

Brunner is not alone in noticing this trend: trend data drawn from Affinity platform users shows the same preference for meetings over emails. Unlike the decrease in email communication, meetings per month directly correlate with an increase in potential buyers per mandate and a decrease in mandate sell time. 

In 2021, Affinity clients took 19.6% more meetings than in 2020. Relationship intelligence enabled Affinity users to home in on the likeliest prospects; automated data capture and reminders gave them the information they needed to nurture the relationships successfully. Rather than the size of their networks, it was the quality of the meetings they took that underlay their success.

Relationship intelligence is shaping the future of investment banking

Before ever getting on a call, more teams are turning to relationship intelligence to cultivate warm introductions, an Affinity metric that measures the strength of a relationship between anyone in their workgroup and anyone among their business contacts. 

This quantitative review of who knows who is, much like face-to-face virtual meetings, another strong indicator of finding more buyers per mandate and achieving a shorter mandate sell time. More warm introductions correspond directly to potential opportunities, and an increase in introductions relates inversely to a shorter time to close.

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All this platform data raises a key question: How can investment banks increase not merely the number of potential buyers per mandate, but the number of buyers most likely to close? 

The activities of investment banks using Affinity point to three stepwise, interconnected strategies: 

1. Parsing your business contacts to uncover existing but hidden opportunities in a comprehensive, workgroup-wide, transparent network
2. Narrowing opportunity lists to those likeliest to close
3. Building stronger relationships with the right contacts over time

“The most successful investment bankers don’t just have more resources or more money to invest—they’re experts at managing and nurturing their relationships and tapping into the skills and knowledge of others in their network.”

Agile, tech-forward investment banks are more effectively harnessing this approach with the support of relationship intelligence and making smarter decisions that put people—and the data related to those people—at the core of their dealmaking strategy.

Read more about changes to the M&A industry in Affinity’s Investment Banking Industry Benchmark, including:

• Benchmarks of the investment banking dealmaking landscape in 2021—including trends for growth, industry, geography, and diversity—and how it compares with previous years.
• A data-driven examination of how some small and midsize investment banks are navigating that landscape.
• A more in-depth discussion of how relationship intelligence technologies are helping investment bankers find new opportunities, assemble deals more efficiently, and close mandates more quickly.
• Examples of investment banks applying relationship intelligence technologies successfully.

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