The mergers and acquisitions business can be very complicated, and dealmakers are constantly looking for ways to be efficient while maximizing returns. Products and services that make it easier to bring deals to completion will go a long way. However, in today's fast-moving market it's hard for dealmakers to quickly pinpoint the products that could be most helpful.
M&A decided to take this opportunity to learn about some of the best new products and services. Not all of the vendors we talked to are new to the marketplace, but they are all offering new products and services or have changed their strategy recently.
Automatic Data Processing Inc.
Everyone in business has heard of the payroll service company ADP (Nasdaq: ADP). Ironically, while providing payroll services is what the Roseland, N.J.-based company has become known for, it's really only one part of its business model. ADP often analyzes labor costs and operational expenses, as well as showing companies meaningful ways to directly affect the profit and loss of a portfolio through both earnings before interest, taxes, depreciation and amortization (Ebitda) and operational effectiveness.
"We can find ways to save companies 3 percent when they streamline human capital or find companies ways to differentiate themselves in the marketplace," says Chris Capko, senior director of strategy-private equity. "We have 97 services outside of payroll, from human resource help to 401k administration."
The company has revamped its offering and is now focused on middle-market dealmakers. Typically, ADP's services were bought at the portfolio level by companies, but now the firm is looking to penetrate companies at the private equity level. "We are making the change because we found that decisions are made at the PE level," says Capko. "It makes sense to talk with the PE people that own the company to align the strategy."
"There is a lot of buying and holding, and PE firms want to increase their effectiveness. That's what prompted them to consolidate their buying processes. They want standardization across the portfolio and we can offer that with this new strategy," he says.
Additionally, today ADP often performs diagnostics on a company before it is sold by a larger company, and it will make recommendations on what type of infrastructure the company should have going forward.
"In the last year we have focused our energy on the middle market. We honed our strategy with the larger market and are now focused on the middle market. We designed the strategy by talking to private equity firms and realized we can really impact the spend for middle-market private equity firms. That's why this new strategy was born," says Capko.
New York-based Dealdrive Inc. is a business intelligence platform that helps investment executives organize and manage their firms more efficiently. The company was founded in August 2012 and launched its platform during the second half of 2013. The cloud-based product can be used on any computer, tablet or mobile device, and it is typically used by private equity professionals, lenders and corporate development executives. Dealdrive uses a software as a service (SaaS) model with a monthly user fee.
"A big problem for people is data overload. Dealdrive compiles everything in one centralized place that's easy to access," says Daniel Nenadovic, co-founder of Dealdrive Inc. "Users can see everything from how individual portfolio companies are performing to what's in their deal pipeline. Everything is centralized, and data is tracked in real time."
The application gives users access to their entire deal pipeline, all of their due diligence materials, all portfolio company key performance indicator (KPI) reports and board meeting materials, and all of the related information, including notes, to-do lists, documents, calendars and contacts.
"It saves time because there's no looking for different files or going into different systems. Everything is right there," says Nenadovic. "It's very efficient."
Dealdrive Inc. has 12 employees and is "growing like a weed," with backlogged customer requests, says Nenadovic, adding that Dealdrive's current clients have more than $20 billion in capital.
"The nice thing is that we can be effective for five-person shops with one portfolio company or 500-person shops with 100 portfolio companies," says Nenadovic. "Our solution can work for many different situations."
Independent Studios has been making corporate films for Fortune 500 companies for 20 years. Last year someone in the M&A business approached Jerry Riedel and his partner Randy Bobo to create a film about a portfolio company they were looking to sell. From that experience, a new business line was born.
Milwaukee-based Independent Studios started producing video tours for companies seeking investors or looking for buyers. Independent Studios usually creates a handful of videos that are about two minutes long for the client. Many sellers of companies are using the videos to compliment the information provided by data rooms. Potential buyers or investors receive a secure link with a password.
"We're filmmakers and someone came to us and said no one is doing this," says Riedel. "Of course at some point a buyer will want an onsite visit, but this reduces the number of visits that are needed and makes the visits more effective and efficient because the buyer will have a better sense of what they are looking for when they are on site."
The videos are meant to give potential buyers an inside look at facilities, employees and the culture of the firm-things you can't get from a data room. "There's a need for this. In the case of one of the last videos we made, the banker on the transaction told us the business sold faster and for more money because of the videos we put together for them," says Bobo.
Adds Riedel: "The video enables the sellers to control the message they want to get out to an unlimited number of investors, regardless of schedules, and it supplements the hard numbers. It gives buyers a glimpse into the company that you can't get from a spread sheet."
In September, Intralinks Holdings (NYSE: IL) launched a global deal sourcing network for industry deal makers. To make this a reality, the company bought MergerID and PE-Nexus, two online deal-sourcing platforms that cater to the M&A industry. MergerID and PE-Nexus were combined to create the marketplace for qualified M&A professionals-MergerID is based in London and previously owned by the Financial Times Group and PE-Nexus is a privately held company based in Miami.
The network, now called Intralinks DealNexus, has more than 5,000 firms using it already and has initiated more than 5,000 actionable deal opportunities. Intralinks recently conducted a survey about the growing impact of online deal networks. It found that more than 40 percent of dealmakers currently use an online deal network to support deal sourcing. Of those dealmakers, more than 85 percent of sell-side M&A professionals have marketed at least one deal online in the last 12 months.
The survey also found that more than 50 percent of buyside professionals and more than 40 percent on the sell side have closed a deal that was sourced on an online network. Almost 70 percent of dealmakers report that online communities of M&A professionals are making deal-sourcing more efficient, according to the survey.
"The platform gives dealmakers the opportunity to communicate," says Matt Porzio, vice president of strategy and product marketing at Intralinks. "It furthers their reach beyond their own rolodex, and PE firms are always looking for deal flow. There are already success stories of people who have met and executed on deals down the road."
This is just the latest roll out from Intralinks. Over the years, the company has looked for ways to become further ingrained in the M&A industry. While the company started in 1996 by providing due diligence services, in the last 10 years the company has launched many additional products, such as its fundraising platform.
"In my 10 years in this industry, a lot of products have come and gone, but we have had a first mover advantage, which is why it made sense to launch products over the years like our fundraising platform and our new networking platform," says Porzio. "The majority of the largest private equity firms have already used us for due diligence."
Intralinks is hoping the networking platform has as much success as its fundraising platform, which has helped private equity firms raise $94 billion in 2013. "We are happy to report that almost one out of every two dollars raised in 2013 was raised with Intralinks fund platform," says Andre Boreas, Intralinks' director of product marketing-alternative investments.
Sageworks was founded in 2004, but in 2012 it rolled out a product to the dealmaking community. The Raleigh, N.C.-based Sageworks is a financial information company that provides private company data and financial analysis solutions to financial professionals. The solution rolled out to dealmakers is Sageworks' database on privately held companies, which is a proprietary database of privately held company financial statements aggregated by industry. Each day, approximately 1,000 of these financial statements are collected by Sageworks from accounting firms and financial institutions through a cooperative data model with Sageworks' clients. The data is segmented and can be queried by 1,400 industry codes, 70 financial metrics, company size and geographic location.
Sageworks' product, called Industry Data, can be used in two different ways, says Mike Lubansksy, director of consulting services at Sageworks.
"Financial professionals can upload or enter the most recent financial statements of a business they are evaluating and get a comparison of that business to its industry peer group in terms of more than 60 financial metrics, from sales growth to profit margins to Ebitda, and industry-specific metrics such as sales per square foot," Lubansky says. "The reports highlight the metrics where the business falls within the top 20 percent or the bottom 20 percent in comparison to industry norms. Users can also generate a report on a specific industry simply by selecting an industry code, revenue range and geographic location, and without entering any client financial data."
Sageworks decided to launch the industry data platform to the M&A market because of the inbound interest they were receiving from dealmakers looking for benchmarking information for the companies they were evaluating. Lubansky says Sageworks has experience about a 75 percent increase work from the M&A industry since the beginning of 2013.
"Finding accurate financial information on privately held companies is difficult due to the absence of any public financial reporting requirements for these companies. Financial data comps from publicly traded companies or from previous transactions with private companies only provide part of the picture," says Lubansky.