With competition for private equity buyout deals so high at present, it is vitally important that GPs are able to effectively source new deals.
Recent research conducted by LexisNexis Enterprise Solutions and Preqin into CRM systems and deal sourcing revealed the importance of networking and personal relationships in achieving this goal. 63 buyout firms were surveyed as part of the research, and it was found that a considerable 78% of these firms have used personal relationships several times at least to source deals, with some, 9% of the total sample, using personal relationships very often for deal sourcing. Furthermore, 61% of firms felt it was desirable to have personal links with target companies.
Given the importance therefore of personal relationships in effectively sourcing and securing deals, it is vital that fund managers are able to effectively manage these personal relationships. With conditions becoming ever more competitive, respondents frequently told us of their intention to invest more in establishing and maintaining relationships, and some intended to hire people who would focus solely on sourcing deals.
Many of the buyout firms surveyed currently use a CRM system for relationship management. Of those firms polled, just under 80% currently use a CRM system or plan to invest in one within the next 18 months. 85% of those firms already utilizing a CRM system have seen some level of benefit from this, and for those that had not witnessed any benefit, the usage of the CRM system was sporadic or not company-wide, which illustrates the need for achieving buy-in to gain the maximum benefit from the system.
The complete findings of the research can be accessed in our complimentary research report, CRM Systems and Deal Sourcing.