Private equity firms’ worst sellside nightmare is playing out in auctions across the country, and pre-empting sale processes seems the only answer. Picture this: Bids are due in the second round of an auction, and far fewer have come in than expected. Numerous buyers have dropped after the first round, and it looks like best-and-finals will come from a very thin remaining pool.

Targets are scarce. But buyers have lost out in so many other sale processes that they aren’t sticking around for management presentations unless they get a firm steer from the sellside that it’s worth their time. What’s the play?

Middle-market investment bankers seeing this scene in repeated auctions over the past year say early engagement with targets is the way forward. Some PE clients socialize sale targets years before they’d even admit the company is a sale candidate, and building trust between the potential buyer is now indispensable. Not just for a working relationship once meetings turn to operations, but to get good intelligence about the progress of the auction. When 20 parties sign letters of intent, the bankers say, buyers need an angle (Aka relationship) to even know if it’s worth sharpening pencils on a bid.

The advisors say that relationship is down to the banker (read: hire me!). On the sellside, sponsors need connected advisors to communicate transparently with bidders to keep them engaged. When buying, banker connections mean the difference between wasting time on a deal where someone else has an edge, and getting the nod from the get-go.

But a larger takeaway seems to be that private equity’s deal pipelines need to focus farther on the horizon to land the right transaction. Gone are the days of pouncing on freshly distributed books in hopes of a fair shake. Sponsors are putting prized assets on the block years ahead of time, and if it’s a PE firm on the buyside, they’ll need to have been at those informal roadshow meetings to have a shot.

-Brandon Zero