Economics vs. Relationship – How the Two are Measured When Choosing a Deal Partner
On March 19, 2019 Opus Connect produced an Investment Banker Deal Connect, hosted by Buchalter in Downtown Los Angeles. Over 50 lower middle and middle market M&A senior executives attended the event, which was sponsored by Avant Advisory, Sapient Investigations, USI Insurance, Lawrence Financial Group, GemCap Solutions, First Republic Bank, and CohnReznick. Opus kicked off the day with a panel on how relationships play a significant role in today’s highly competitive market, followed by the Deal Connect portion of the event in which attendees were paired up for multiple one-on-one meetings.
The panel, entitled Economics vs. Relationship – How the Two are Measured When Choosing a Deal Partner, was moderated by Phil Schroeder, one of Buchalter’s Shareholders. Panelists included two investment banking professionals (Burke Dempsey, Managing Director of Wedbush Securities and Scott Cohen, Vice President of Metropolitan Capital) and two private equity professionals (Carrie DiLauro, Director of Operations at Hamilton Robinson Capital Partners and Larry Simon, a Partner at Clearview Capital). Mr. Schroeder asked questions relating to how relationships affect deal-flow, from getting to the negotiations table to closing the deal.
DiLauro posited that in the highly competitive private equity market of late, proprietary deals have become a thing of the past. Dempsey generally agreed, and explained how this affected the role of investment bankers who now strive to save private equity firms the trouble of chasing irrelevant deals by understanding these firms and bringing only appropriate deals to the table. Cohen, in turn, posited that coming to events such as the Deal Connect is a great way for investment bankers to learn more about the private equity firms and to understand what they are looking for.
The panelists had some interesting perspectives on how best to ensure that a transaction closes once the parties are at the table. While economics are obviously relevant to some degree, Simon shared his view that “relationships are everything.” He analogized the negotiations table to a date: “You get in the room and you are either feeling it or not. You need to feel the vibe and have a like-mindedness.” DiLauro also agreed that economics isn’t everything in a deal. She recounted an experience in which her firm was buying a family owned business run by a husband and wife, who disagreed on what they wanted out of the deal. The wife wanted to stay on and run the company, while the husband was looking to buy a marina. Ultimately, a higher bidder lost out because they were too aggressive in their approach and the couple felt more comfortable with Hamilton Robinson.
The investment bankers also agreed that the relationship aspects of a deal cannot be understated. Cohen, for example, always asks families what the legacy is they want to leave and what would they view as a success in 5 years. In his experience, there is more to these transactions than only the money. Dempsey also conferred that there is an element of trust and goodwill that goes into a successful transaction. When terms and conditions are being presented, it’s important to feel confident that the people across the table from you are knowledgeable, fair and honest.
Following the panel, participants entered into an afternoon of one-on-one meetings, carefully curated by Opus Connect to facilitate meaningful and relevant connections. Matches were mostly between capital providers and investment bankers and were based on criteria such as industry and asset classes. In addition, each individual was pre-qualified by Opus Connect prior to the event.
Upcoming Deal Connect events are taking place in San Francisco, Denver and Toronto this May. You can find more information about these events as well as many others on our website. Contact us today to sign up or to become a member.