M&A dealmaking surged to unprecedented levels in 2021 in a climate where dealmakers felt the pressure to make rapid acquisition decisions. The investment cycle has now lengthened and PE firms have more time to evaluate deals. But this shift doesn’t come without its own challenges, namely credit headwinds and a renewed focus on the value creation process.
We sat down with Andy Bryson, Chief Product Officer at Affinity, Don Ritucci, Head of Healthcare M&A at Oppenheimer & Co. Inc., and Jeremy Holland, Managing Partner at The Riverside Company to discuss how firms can adapt to meet the challenges of today’s investment environment.
Read on for three key takeaways from the conversation.
Nurturing relationships is critical to new and rebound opportunities
Relationships always play an important role in dealmaking, but there’s nuance to the impact they have in a slower market. Jeremy Holland, Managing Partner at The Riverside Company began the discussion by reflecting on how the market has changed: “There’s a night and day difference from 2021 and early 2022. It was a breakneck pace, probably the most frenetic I've seen in my career.”
Now dealmakers have the breathing room to determine the best deals for their firm’s investment thesis. Andy Bryson, Chief Product Officer at Affinity said, “Deals are moving slower. So there's more time spent building buyers lists and trying to figure out how to set up sort of the right partnerships.”
This often means returning to conversations that may have fizzled out in the past. “If we haven't seen a deal announcement, it's a time where a friendly circle back can't hurt to remind the intermediary that if for any reason they want to revisit that offer, we're still happy to engage,” Holland said. “They're often quite surprised if you're willing to hold value, during a time of dislocation, if that lead bidder stepped away, went on pause or tried to retrain, there might still be an opportunity there.”
Firms like Oppenheimer & Co. Inc. are seeing that if a deal with high valuation didn’t go through at the end of last year, those same sellers come back and say that they wished they had taken the original offer.
“Sellers are starting to realize what we thought we could get 18 months ago, the market has just fundamentally shifted.” Don Ritucci, Head of Healthcare M&A at Oppenheimer & Co. Inc., said.
According to Ritucci, this validates that the firm is still wanted in the market and that potential missed opportunities could have a different outcome in the current market. None of this information, however, would have been shared without the firm’s continued nurturing of the relationship.
Holland added: “Hanging around the hoop can really pay off when you have a dislocation in the deal environment. Just because we came in second place six months ago doesn't mean that that deal’s gone forever.”
“Things have shifted so much, we can't take relationships for granted,” he continued. “We've got to stay in front of people, remind them of all the new things we're doing.”
Using tech can scale outreach
In-person meetings with prospects and companies has made a comeback over the past year, with Ritucci commenting: “We’re doing a lot of face-to-face meetings, [including] planning a roadshow with a city tour,”
However, he conceded that the volume today doesn’t match the years prior to the pandemic.
Holland added, “Zoom’s great at maintaining relationships with folks [...] that I've known for a long time, but it's really difficult to build new trusted relationships. There's just nothing like getting together with somebody in person and really spending some quality time where they're not distracted.”
The panel discussed technology’s role in dealmaking more broadly—how insights can help dealmakers prioritize their time, and how relationship intelligence can highlight that valuable warm introduction to a new opportunity.
“Tech enablement reminds you where to go and how to tailor your time and how to be more efficient with your scheduling,” said Holland.
Bryson added: “Technology can help you figure out who you should go meet with when you're going on your city tour, right? And so by looking at the relationships that are either most valuable or the gaps where you need relationships, you can go figure out who you should be meeting with.”
The panel also emphasized the importance of personalized outreach when it comes to getting deals through the finish line and how to best utilize natural language processing AI for these efforts.
“I think that the vast majority of the industry is very interested in it,” Holland said. “But it needs to be thoughtfully and appropriately used. I expect that in months to come, the usage will accelerate radically once folks get comfortable with security issues.”
Supporting portfolio companies
Inflation and rising interest rates are putting increased pressure on portfolio companies. As a result, dealmakers are spending their time supporting them. Investor knowledge plays an important role in helping founders and their teams navigate such choppy economic waters.
“What we see is a big shift in focus with our customers spending more time on existing portfolio companies,” Bryson commented. He added that Affinity customers are increasingly looking for ways to optimize how they make introductions, provide guidance, and support their portfolio companies.
One way The Riverside Company has done this is by hiring professionals to assist portfolio companies with their respective needs.
Holland said: “We're often working with an entrepreneur who’s been wearing multiple hats, and even though several of those hats stay on—they would like to hand some off and we view that hiring as an investment in growth. [...] So the expense is built in the early years and our operating partners are very helpful in helping them build out that C suite so they can all grow faster [...] And it's really times like this that everyone comes to be reminded of how valuable operating partners are.”
Remarking on what he sees across Affinity customers, Bryson added: “We see a big investment in those sorts of advisory networks, the people figuring out who they know, across their team as an expert in a certain area, and trying to leverage those to support portfolio companies.
He continued with practical advice on how firms can operationalize this work: “This involves building a list of experts in specific areas, nurturing those relationships the same way you might prospect, and trying to leverage them to help, or provide some sort of advisory service.”
Holland’s team offers expert knowledge through advisory boards of different stripes and flavors that can best support their portfolio companies as they continue to scale.
“A lot of the best executives aren't available to be an in-house resource, but you can get them for an hour a week, an hour a month, whatever it is to bring together the best minds around one of your portfolio companies,” he said. “We're having a lot of success with asking for a more limited time from these experts.”
Turn today’s challenges into opportunities with Affinity for Salesforce
The current PE and IB landscape presents challenges and opportunities. Longer investment cycles require dealmakers to prioritize relationships with ideal target companies and intermediaries. Building and nurturing these connections can rekindle conversations and unlock missed opportunities.
Outreach remains crucial, and personalized engagement is vital for securing deals. Additionally, supporting existing portfolio companies and offering expert knowledge increases their success in navigating the evolving landscape.
Affinity's relationship intelligence assesses your firm's shared network and accelerates the investment process with key relationship context that can help your firm identify target companies that align with your strategy.
Make data-driven decisions, identify warm introductions, and elevate your strategy to unleash your network's true potential with Affinity.
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