Social Dealmaking: The New Deal Catalyst
Online deal sourcing, the process of leveraging online communities to connect with buyers and sellers, is an efficient way to find the right opportunities.
18 March 2014
Successful mergers and acquisitions have always been about finding the right deal with the right company at the right time. And as we all know, using traditional methods for buying or selling a company can be a notoriously laborious and complex process. Across the industry, private equity firms close, on average, only one out of every 80-100 opportunities reviewed, and the standard timeline for a deal is between 12-24 months.
Online deal sourcing – the process of leveraging online communities to securely connect with other buyers and sellers – has become an efficient way to find the right opportunities and the correct buyers. Online dealmaking platforms are helping to streamline processes and shorten the cycle for both buyers and sellers at all phases of the M&A transaction, including the following:
- Deal preparation - Online deal sourcing allows stakeholders to simplify the preparation process for a faster ramp-up. For example, sellers can reuse existing lists of buyers saving the time of re-creating buyer lists for deals that are in industries similar to ones they have previously marketed.
- Marketing or sourcing the deal - Bringing a potential deal to an online sourcing platform essentially compliments your existing process. Canvasing real-time buyer-generated information, sellers will ensure they aren’t missing out on potential buyers seeking deals similar to the one they are representing.
- Due diligence - One of the most tedious components of a deal, due diligence can involve the review of hundreds of thousands of documents. Online deal sourcing can provide a discrete, confidential place where all stakeholders can share information during this often time-consuming phase.
- Negotiation - An online deal sourcing platform can help sellers respond more effectively to bidder requests. Buyers and sellers can use platforms to set pricing structures, share letters of intent and purchase agreement documents securely and quickly.
- Closing/Post-merger - Online platforms ensure a smoother closing transaction and a better transition experience for all parties, providing a secure place for post-closing financial adjustments.
- Making connections, shortening timelines - A connection made through a deal sourcing network led to a faster closing, highly beneficial M&A transaction for Charlie Lorelli of Lorelli & Co. His firm specializes in M&A advisory for the chemical industry. While Lorelli had built a great roster of contacts over 25 years, the chemical industry is relatively small, and he wanted to maximize his chances to learn about new opportunities and players.
Patrick O’Keefe, principal at the private equity firm Excellere Partners, experienced a similar challenge. Excellere works with entrepreneurial companies that need additional strategic resources and capital in order to grow their businesses.
Even though both firms traveled in the same chemical industry circles, neither Lorelli nor O’Keefe had ever heard of each other. But when both joined Intralinks Dealnexus™, a social dealmaking platform, they were matched almost immediately. Excellere Partners was one of the firms Lorelli discovered in his initial deal search using Intralinks Dealnexus – and from there, everything fell into place. Lorelli pitched O’Keefe on the deal he was working, and Excellere responded to the pitch. The transaction closed within 45 days of signing the letter of intent – a deal that would normally take twice as long to close.
Digital Deal sourcing: Here to stay
An Intralinks survey conducted in September 2013, titled “How Deals Get Done,” polled more than 2,400 buy and sell-side M&A professionals around the world on the usage of online deal sourcing, and revealed that 40 percent of dealmakers have adopted online deal sourcing to supplement their existing deal processes.
Of those, 50 percent have closed a deal as a direct result of deal sourcing platforms. Social and community-based technologies are transforming how deals get done. Deal sourcing platforms are rapidly becoming mainstream, offering a low-cost, long-term approach to locating target counterparties. Dealmakers should consider online deal sourcing networks and as an effective way of ensuring that they find the right buyers and the right deals.
As Intralinks’ senior director of strategy and product marketing, Matt Wells is a key member focused on the development and go-to-market strategy for Intralinks’ M&A business which includes our virtual data room and deal lifecycle solutions. Matt joined Intralinks in 2012 upon the acquisition of PE-Nexus, a company he co-founded in 2010 that pioneered the concept of online deal sourcing and buyer identification. Before PE-Nexus, he was a vice president at Cross Keys Capital, a boutique advisory firm, where he focused on middle-market M&A transactions.