The overriding, ever present recurring theme of PE fund managers is dealflow. What keeps a PE fund manager up at night? Dealflow. What gets a them up in the morning? More deals. What drives them to stay connected and answer the phone while on vacation? That would be more deals.
And dealflow’s brother is price. As dealflow becomes more pressured and harder to come by, prices of companies go up. And seemingly everything gets shopped since fund after fund are grabbing for the same opportunities.
Proprietary access to deals is the holy grail. Into this challenge, how does a professional investor win, if you can’t even get to the start line?
Consider how David Moross solved the issue. In 1998 David floated an idea by Mark McCormack, the brilliant founder of IMG. IMG was the first company to capitalize on the endorsement power of champion athletes like Arnold Palmer and Jack Nicklaus. IMG managed their business careers, which expanded beyond celebrity endorsements into fully branded companies with multiple product lines. TV commercials made Arnold Palmer wealthy, but Mark McCormack’s strategy for creating and building Arnold Palmer Enterprises made the golfer his empire.
David’s idea was to form a new fund, a joint venture between his fund and family office and IMG. Chase Capital and others kicked in for an initial total of $180 million, and they were off to the races. The IMG relationship bore fruit with deals including Skip Barber Racing Schools and ESPN Classic Europe.
The resulting dealflow couldn’t have been achieved without the joint venture with IMG, although David notes what was even more important was the instant credibility worldwide thanks to the IMG name.
So much more goes into success than just the initial introduction to a potential investment. And David is the first person to observe that while IMG produced over a thousand leads, it only led to 5 or 6 deals. But still.
If you were to go on to the websites of most middle market or lower middle market PE funds and remove their names from the text, it would be impossible to tell who they are simply by reading their descriptions. Everyone’s website sounds the same.
Great differentiation for successful funds is built on strategies like Falconhead’s IMG partnership. So for funds interested in growing by way of increasing dealflow, think about the relationships that could be vital to expanding your footprint and giving you unique differentiation.