Finessing the Funnel

When you talk to business development executives, you inevitably end up discussing “the funnel”: that ratio of opportunities that firms look at compared to how many result in an investment. Sellers, buyers and intermediaries are all thinking about how their time is best spent and how they can get to the right deals quicker.

In our second annual installment of Business Development Professionals to Watch, some of the most successful players in the field discuss which strategies work for them. In light of weakening market fundamentals, some firms say they are seeing less deal flow from investment banks. Others think financial advisors are running more targeted processes: going to a short list of prospects they think will be more likely to bid or buy. This increasingly means buyers need to get in front of sellers early and often to make sure they are not missing out on quality opportunities.

Several private equity firms now say they are running on a “thematic investing” platform, which involves identifying sectors or subsectors they think will be fruitful for the next several years and using their networks, existing portfolio companies and their management teams to find deals or add-ons in those areas. Many are relying on Grata and other search engines to narrow down the opportunity set more effectively. Technology also comes into play with business development professionals using sophisticated CRM systems to track deals they looked at in the past. They can evaluate which worked or didn’t work—and why—to try to use past experience as a guide for where to focus their efforts in the future.

Some of the brightest stars in middle-market business development across private equity, corporate development and investment banking share these tips and more on pgs. 38-67. Katie Oswald, managing director in business development at Crossplane Capital, who was featured in last year’s BD list, also talks about the expanding demands of the BD role in her In Perspective column on pg. 12. And our feature story on pg. 68 discusses the nuances of sifting for quality late-stage startups at a time when many are getting hit hard by market headwinds. Read on for more tips and tricks of the trade. //

STEVE CASTINO Chair of Finance, ACG Board of Directors, and Chief Growth Officer, Rehmann