Deal sourcing is a constant grind and critical to a fund’s long-term success, a credence regularly reverberated by PE professionals. Access to the appropriate tools, complemented by the right data, is a requirement for any effective sourcing strategy. Michael Lewis’ celebrated book, Moneyball: The Art of Winning an Unfair Game, illustrated baseballs’ success in utilizing statistics and analytics to their advantage. So, why not apply similar data concepts to the intensely competitive realm of deal sourcing? To do this, first, generate scorecards for each intermediary, and second promote awareness of current market trends, based on your sector and criteria, and adjust your approach accordingly.
Just as Moneyball describes a baseball manager’s groundbreaking effort to engineer a competitive team using performance analytics, each intermediary should have a scorecard that relates to your firms’ target criteria. The following performance parameters should be analyzed for each card: 1. Process Index: What type of processes does the deal intermediary run (limited, moderate or broad)? 2. Success Rate: What percentage of deals closed that the intermediary brought to market? 3. Relevancy: What percentage of the intermediary’s closed deals were relevant to your firm’s target criteria? 4. Coverage: Of the relevant closed deals, what percentage did your firm see?