Running the Boutique Investment Bank
In building AltQuest’s initial book of business, we sent over 2,000 emails to our initial coverage group, industrials/manufacturers. The response rate was approximately 2%. Of those that responded approximately 50% were interested in seller and 50% were interested in taking an offer on their business. Of those that were interested in selling their business, approximately 50% accepted our fee agreement.
When first starting the M&A firm, majority of time should be spent originating sell side mandates. Once the investment banker gets to 20 sell side mandates, one can ease up on origination and transfer those responsibilities to analysts and associates hired as interns which then turn into full time analysts/associates.
This means that all of the investment banker’s time will now be spent in M&A execution with sell-side pitches from time to time when the analyst/associate originates an opportunity.
Good analysts and associates will originate 2 to 3 sell-side pitch opportunities per week so the investment banker will stay busy on the phone with these CEOs/Founders/Partners.
Realistically it will take a year to a year and a half to close your first deal if you are just starting out in M&A. If you have been in M&A and have a book of business, the timeframe shortens to the typical time it takes to close a deal which is shown below.
It is important for the M&A professional to plan for this extended time frame and not to get discouraged when deals blow up, get delayed, or change. All deals associated with an actual perpetuity close, it is just a matter of time.
Building an Investment Banking Practice:
It will take a year of pulling emails with coverage, emailing everyday getting 2% response rate, and landing engagements to get to 20 M&A engagements. Year 1 & 2 is spent in data mining and emailing (coverage capability) as well as building out the analyst and associate team to do the same coverage. Year 3 is focused on qualifying buyers, buyer seller meetings and closing deals.
AltQuest’s coverage is manufacturing, healthcare, business services, and software in Texas, Florida, New York, and California.