Grow Your Business Through the M&A Pipeline

Scaling your business requires understanding the types of investors and knowing the state and status of their portfolios.

The vast majority of venture capital and private equity portfolio exits occur via M&A, as opposed to through an initial public offering (“IPO”) process, so understanding these investors is a must.

Editor’s note: This is piece is the second part of four  on Mergers & Acquisitions (M&A) Strategy- Author’s note: The activities that lead to the identification and ultimate execution of an opportunity are very intertwined and subject to continuous learning and improvement. 

With that in mind, I will summarize four main activities in the M&A (mergers and acquisitions) Process Lifecycle over the course of four different articles as follows:

  • Acquisitions– part 1
  • Sourcing- article below
  • Approach
  • Execution

What are sourcing Activities?

Sourcing activities start with clear initial Corporate Strategy guidelines and an initial formulation of a practical M&A Strategy, companies  look to systematically step into the market to develop a pipeline of opportunities that have a high probability of success.

Building Productive Relationships Systematically

To communicate interest, increase its presence, and gain access to the flow of information, companies need to establish and maintain a relationship presence in the M&A ecosystem with professional investors such as:

  • Venture capital (“VC”)
  • Private equity firms (“PE”)
  • Investments banks

All of firms represent important sources of information about and in some cases, influence, over potential targets.

The stronger the relationship that companies forge with the ecosystem, the higher the likelihood that they receive a steady flow or relevant opportunities.  Although companies should always exercise care when sharing information that might have competitive or implications, it is possible to have meaningful, productive dialogues.

Venture Capital and Private Equity Firms

The vast majority of venture capital and private equity portfolio exits occur via M&A, as opposed to through an initial public offering (“IPO”) process.

Understanding these investors and knowing the state and status of their portfolios is worthwhile for pipeline development.   At the same time, these investors are keen themselves to build relationships with and an understanding of the universe of potential buyers of their portfolio companies.  Elements of a relationship strategy around VC and PE firms includes

Senior-level relationships and regular interactions with VC and PE firms that actively lead investments in target areas

It’s crucial to stay up to date on insights of the VC community specific to their priorities and initiatives of commercial or technical interest to companies in a VC’s portfolio. Commercial potential may exist before a full understanding of the full strategic opportunity develops – which could bring substantive benefits in the short-term.

Next page: Investment Banks and Unsolicited Opportunity Processes / Roles

Elias Mendoza
Elias Mendoza
Elias Mendoza is Partner & Chief Operating Officer at Siris Capital, Corporation. In addition to COO, Elias’ responsibilities at Siris include identifying and evaluating trends within existing and potential industry verticals for investment opportunities, and assisting our Executive Partners in evaluating underlying business strategies of targeted companies and existing portfolio companies. Prior to joining Siris, he was a Partner at Union Square Advisors, where he served as its Chief Operating Officer and a senior banker across the firm’s verticals. Through July 2011, Elias held various senior positions at IBM, including Vice President and Global Head of Corporate Development. In such capacity, he was responsible for identifying , executing and integrating all acquisitions, investments and divestitures for the company on a worldwide basis. Elias’ previous experience includes over twelve years spent at Morgan Stanley & Co., most recently as an Executive Director in the Investment Banking Division. He received a Landegger Program Certificate in International Business Diplomacy and an MBA from Georgetown University. He received his AB from Princeton University.

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