By Scott M. Estill
As the Private Equity, Venture Capital and Family Office investing markets mature, it continues to become increasingly difficult to buy high quality companies at prices that are considered a “fair deal,” let alone cheap.
When selling a company, an auction is a very efficient process to maximize value; however, buying this same asset or a similar one in a prudent manner can be difficult. I believe that as efficient as the auction process is today, the market for connecting high quality people with deep domain expertise to investing professionals who believe certain market segments can be improved is still very inefficient. As such, this represents a significant opportunity.
The Association for Corporate Growth was established to connect middle market deal professionals and act as a community to share best practices. If you are in this same predicament of finding high quality and interesting companies to invest in without simply stroking the largest check, let’s discuss different scenarios and solutions:
- There are a significant number of executives that are currently employed but have been approached to run another company. Many are interested in select introductions to institutional investors to help these firms source and diligence opportunities and be given the opportunity to invest in these companies, join the Board, be an in-house executive in residence and/or leave their current company and join as CEO or other C-Suite position.
- Many executives whose company is about to be bought or sold by an institutional firm are looking for their next opportunity – post transaction. They are also looking to build longer term relationships with select institutional investors as they look for full-time employment.
- Many executives are really happy with working for their current employer but are interested in a small number of institutional relationships to augment their professional experience. Institutional investors need these executives to get comfortable paying and playing in auctions.
I do not believe the auction process will or should disappear; it serves an important part of the deal infrastructure. However, it’s all about the people and connecting those who have proven to have an edge and opinion based on experience to members of the investing community. This will help maximize value and limited partners’ returns, which is an important and still nascent piece of the M&A puzzle.
Scott M Estill is a Partner at Heidrick and Struggles and building their proprietary executive introduction business and M&A practice. He is also a Partner in the Private Equity, Investment Banking, CEO and Board practices at Heidrick & Struggles. Scott spent close to 20 years as an M&A banker prior to joining Heidrick & Struggles and is on the Board of ACG.