Building a comprehensive buyers list is a critical component of successful sell-side M&A advisory. The potential buyers on the buyers list have expressed an interest in investing capital and acquiring businesses within specific industries or niches. This article explains the process of creating an effective buyers list, and introduces both traditional and AI-driven methods used by sell-side investment banks to enhance their list-building capabilities.
What is a buyers list?
A buyers list is a curated database of individuals, companies, or entities who could potentially be interested in acquiring a specific company. Investment banks initiate interest and share materials (such as a Teaser, IM, and Management Presentation) about the company on sale with the potential buyers.
The significance of buyers lists in sell-side investment banking:
A good buyers list plays a pivotal role in facilitating successful transactions and maximizing value for clients. It enables investment banks to:
- Identify potential buyers that are actively seeking acquisition opportunities.
- Streamline the deal execution process by connecting sellers with the right buyers efficiently.
- Maximize value by securing favorable deals through targeted outreach and engagement.
Buyer List Building Strategies
How to build a buyers list? Here are a few traditional ways and a bit more swift AI-based method.
Traditional methods for building buyers lists
Industry research
Investment banks conduct in-depth market analysis to identify potential acquirers within specific sectors. This research helps them understand industry dynamics and identify companies with strategic alignment and financial capabilities for acquisitions.
Networking
Establishing strong relationships within the industry is crucial. Investment bankers leverage their professional networks, attend industry events, and participate in conferences and seminars to connect with potential buyers and stay updated on market trends.
Referrals and recommendations
Referrals from trusted sources such as lawyers, accountants, or industry experts can provide valuable leads. These referrals often come from professionals who have insights into potential buyers looking for acquisition opportunities.
Direct outreach
Investment banks proactively reach out to potential buyers through targeted email campaigns, personalized invitations, or direct phone calls. This approach allows them to showcase specific investment opportunities and gauge interest from potential buyers.
AI-driven methods for building buyers lists
AI-powered strategic buyer identification
AI-driven tools, such as Inven, help sell-side investment banks in the process of finding strategic buyers, as these tools provide specialized software that can scan through millions of company websites to identify potential buyers. These AI-powered tools help companies with list building by:
- Analyzing the activities and initiatives of various companies: AI can determine which ones align with the interests and objectives of the target company, indicating a potential fit for acquisition. This intelligent screening process significantly reduces the time and effort required to compile a list of strategic buyers.
- Utilizing Filters for Targeted Prospecting: In addition to its website scanning capabilities, AI can apply filters to refine the search for strategic buyers. For instance, it can focus only on companies that have key personnel with titles like "Corporate Development" or "M&A Manager." Such titles suggest that these companies are actively seeking acquisition opportunities. AI-powered tools like Inven can swiftly sift through vast amounts of data to identify these target companies.
- Providing Efficient Contact Initiation: Contacting potential buyers can be a time-consuming process. AI-Powered tools integrated into platforms like Inven, can simplify this task by providing easy access to contact information. This functionality streamlines the outreach process, enabling investment bankers to reach out to potential buyers promptly, thereby expediting the entire deal-making process.
Read the tips on how to use Inven to identify potential buyers.
AI-powered PE buyer identification
AI's capabilities extend beyond identifying strategic buyers; it can also aid in locating suitable PE buyers for the company being sold. This process involves a more nuanced understanding of the target company and the specific industry it operates in. AI-Powered PE Buyer Identification can be done by:
- Analyzing Nuances in Industry Focus: AI-powered tools like Inven can analyze the nuances of various industries, going beyond general industry codes. For instance, while traditional tools may categorize a company as "manufacturing," AI can discern specific aspects such as "manufacturing aluminum products for the automotive industry." This level of granularity helps identify PE firms that focus on the precise niche and have a genuine interest in the target company.
- Studying PE Firms' Investment History: AI's processing capabilities enable it to analyze the vast portfolios of PE firms, identifying their past investments in companies similar to the one being sold. This historical analysis provides valuable insights into the preferences and focus areas of PE investors, helping investment bankers create a more targeted and compelling pitch. Filtering PE backed companies with Inven's tool can uncover potential buyers from the same industry.
- Understanding PE Firms' Focus Areas: AI can go beyond publicly available information and delve into more intricate details about PE firms' focus areas. By studying their investment strategies, sector preferences, and even the individual industries they favor, AI can build a comprehensive picture of potential PE buyers for the target company.
AI is changing how investment banks work. It saves M&A professionals' time in buyer list building, but also in acquisition target search, market research, and other manual tasks.
Building a Buyers List: A Step-by-Step Guide
To summarize, a buyers list is a catalog of strategic investors, financial buyers and entrepreneurs actively searching for their next acquisition. The list of buyers is compiled by M&A advisors, investment bankers, or business brokers managing a company's sale.
The process of creating a buyers list involves several steps.
- First, professionals gather a broad pool of potential acquirers by leveraging their existing contacts, network, AI-powered tools and company databases.
- Then each candidate is evaluated for their compatibility with the selling company. This compatibility assessment takes into account factors like the buyer's business practices, strategic goals, acquisition criteria and overall fit with the seller's vision.
- Once the list is finalized, the M&A professional ranks the potential acquirers and prioritizes the most potential buyers which receive teasers. The aim of sending teasers is to generate an "indicative offer" or formal expression of interest from multiple buyers on the list.
- If the top-ranked candidate doesn't express interest, the agent simply moves down the list, strategically engaging with the next most suitable buyer.
Key Takeaways: Building a Winning Buyers List
Building a buyers list is a critical process for sell-side investment banks. While traditional methods can offer opportunities and new connections, AI-driven methods are unique in their extensive search capabilities. These tools provide access to companies in global markets and advanced data analytics. Combining networking and referrals with dynamic AI methods allows investment banks to create more exhaustive buyers lists that align with their clients' objectives.
To find out how Inven suits your process and get a free buyers list demo, book a brief meeting.
