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M&A Review: Mr Will, your M&A advisory boutiqueneomerge regularly advises financial investors on buy-and build mandates. Whyis deal sourcing so crucial for these investors and for you as an M&Aadvisor?
Dieter Will: Without systematic deal sourcing, thereare no transactions. Financial investors rely on a proprietary deal flow togenerate attractive returns. For us as M&A advisors, a robust dealorigination process is the basis for presenting attractive targets to ourclients. This is particularly challenging in the tech SME sector. Companies areless visible, often entrepreneur-led and not actively looking for a buyer.To besuccessful here, you have to be proactive, creative and, above all, structuredin your approach.
M&A Review: What approaches to deal sourcing do youencounter?
Dieter Will: There are three main channels for the SMEsegment. First, the foundation is laid by maintaining your own network ofM&A advisors and multipliers. This often leads to approaches in the contextof sell-side projects. Although this is rather the exception, opportunitiesoccasionally arise through referrals. The second component is the cultivationof the entrepreneur network, which creates proprietary situations. Thirdly,structured deal sourcing with focused outreach has become increasinglyimportant in recent years.
M&A Review: What are the challenges associated withthese approaches?
Dieter Will: Above all, the entrepreneur network model isnot scalable and has limited application, as it depends on regularparticipation in events and intensive maintenance of this network, whichrequires a very high time investment. For this reason, the third channel ofstructured entrepreneur outreach is becoming increasingly important.
M&A Review: What does this entail in practice?
Dieter Will: It is key to present a substantial case to theentrepreneur and demonstrate that you have thoroughly researched their companyand business model. It is equally important for M&A advisors to demonstratein-depth knowledge of the relevant industry and the potential fit with thebuyer. Next-level deal sourcing: What drives proprietary deal flow in the ageof AI?
M&A Review: What part do tech and AI play in theprocess?
Dieter Will: A multi-channel approach to outreach, bothphysical and digital, is essential nowadays. A certain amount of persistencealso pays off over the long term. Furthermore, a proprietary tech stack isindispensable. With professional CRM, AI databases and semi-proprietary AItools based on language models (LLMs), M&A advisors can not only createlong lists of potential target companies, but also control the entire process.Another example of how LLMs can be used is to personalise outreach. But it‘salways important to keep an eye on quality control, which should still be donemanually at critical points. Models are developing rapidly, yet there is stilla lot of room for improvement.
M&A Review: How will deal sourcing change for privateequity investors focusing on medium-sized tech companies
over the next five years?
Dieter Will: More investors will professionalise their dealsourcing setup, as private equity without proprietary deal flow rarelygenerates excess returns. This is likely to further intensify competitivepressure surrounding proprietary deals. Technologically, we expect structured,AI- and tech-supported outreach processes to improve significantly in qualityand become even more prevalent. At the same time, personal contact withentrepreneurs is becoming increasingly important as a component of a thrivingorigination strategy. These two worlds must be combined in order tobesuccessful in the future.
