A family office needs enough quality deal flow to have real choices. In this chapter, I look at ways to source direct deals and focus your relationships so you can find opportunities that fit your family's investment goals.
More deals, better choices
Let's assume only the top 5% of deals shown to your family are worth your time. If you see twenty deals in a year, that gives you one deal to consider, or none. If you can maintain or improve quality while reviewing four hundred deals, you could choose among twenty.
The aim is to have more good deals than you have capital or time to execute. Then you can rank them and select the ones with an attractive cost basis or strategic potential. That might mean combining well-positioned companies, establishing a mini-monopoly, creating a platform business, or controlling a major choke point in a valuable industry niche.
Five ways to source direct deals
1. Call on relationships. A proactive calling effort can help create a steady flow of deals. Start with business relationships you already have and ask about potential opportunities. You could also form a dedicated team to reconnect with past relationships and build new ones in a specific sector.
2. Attend niche events and share your expertise. If you want to invest in a particular sector or type of company, attend its leading conferences and share your investing experience. Over time, your family can become a known presence. Building relationships may help you hear about potential deals and industry rumors before opportunities are widely shopped.
3. Speak at middle market events. Associations and conferences bring together business leaders and investors. Some are looking for family office speakers to explain what kinds of deals they seek. Present your ideal partnership, including the sector, market capitalization, and terms. Audience members may follow up with relevant inquiries and introduce you to their relationships.
4. Focus on fifty or so high-value relationships. Without a narrow focus, you can drown in opportunity and spend too much time on conversations and inquiries. Concentrating on around fifty high-value targets lets you work those relationships and prioritize people you believe can lead to a successful deal.
5. Consider deal networks. Deal networks connect investors and companies, but their quality varies. The better groups can help you find new sources and advertise the deals you are pursuing.
Put your investment criteria on one page
A direct investment worksheet can help turn your approach into a practical plan and a document to discuss with your family and team. The chapter describes a one-page worksheet that can be printed, shared as a PDF, or completed in Word.
Use it to state what kind of investment you are seeking and give your team a consistent reference when evaluating opportunities. The chapter's examples include sector, market capitalization, and terms. Keep the focus narrow enough to guide sourcing and conversations.
Action checklist
- Decide what kinds of direct investments fit your family's goals.
- Identify business relationships to call about potential deals.
- Choose niche industry events where your family can build relationships.
- Find middle market associations that welcome family office speakers.
- Select around fifty high-value targets for focused relationship building.
- Review deal networks and assess their quality.
- Put your investment criteria into a one-page worksheet for your team.
From the book
"If your family only sees twenty deals a year, your top 5% of deals will be exactly one deal; you will have the choice of one deal or no deal for the year. "
"You always want to have more great deals than you have capital or time to execute so you are only cherry picking the ones you are getting in on at a great cost- basis and making money at the time of acquisition or by combining strategically positioned companies, establishing a mini-monopoly, creating a platform business, or controlling a major choke point in a valuable industry niche. "
Educational only. Nothing on this site is investment, tax, legal, accounting or other professional advice, or a recommendation on any security, manager, structure or allocation. Speak with qualified professionals before acting.