10 Years Serving the M&A Market: What's Changed?

Alex Karlsen

It's been 10 years since CAPTARGET opened up shop as one of the first domestic outsourced analyst providers on the market. Since then, our client’s M&A businesses have changed as much as ours.  

Ten years ago most firms were skeptical about outsourcing key analyst functions and preferred to purchase tooling and analyst coverage internally. While this ensured they had maximum control and visibility, it was also a costly and inflexible proposition. Firms that couldn’t afford an internal analyst team struggled to compete with larger firms, and larger firms sucked up the cost to stay competitive. The standard blueprint for an M&A firm seemed to be:

  • Hire a full time analyst, even if deal flow was volatile
  • Buy at least one big data took (CapIQ, FactSet etc)
  • Spend time and money training the analyst only to have them leave, on average every two years

This strategy typically cost more than 100k per year per firm, not including the cost of training and frequent turnover.

Now, the size of the average middle market M&A firm has shrunk nearly by half, and there are nearly twice as many firms serving the middle market. Larger middle market firms remain competitive, but there are now boutique firms that are hugely successful in large part to their ability to have access to the team and tools needed to be successful without carrying the fixed cost. Additionally many more tooling and data options have entered the market allowing for M&A firms to better pick and choose the coverage they need based on their area of focus. While private company data is still an imperfect science, the info and the interfaces have improved significantly.

Our business has changed as well. We started as a sort of FTE replacement where you could hire our team to be your back office full time. While this worked for hundreds of M&A firms, as the market evolved it became clear bankers wanted maximum flexibility. As such we no longer provide recurring analyst support services. In place we are 100% ad-hoc, allowing our M&A clients to use us as much or as little as needed, all while knowing we have the access and talent needed to help with anything from CIM creation to prospect list development. We have been embraced as a viable research and origination solution by nearly 1000 firms...and outsourcing is no longer a bad word.

We enjoyed years without competition as a first mover, but have experienced more growth over the last few years as many new players enter the space.  Our team and our clients all weathered the challenges of the '08-'09 downturn and survived, even thrived as businesses during Covid.

As we enter our 10th year of service, we ask ourselves and our clients one question - how can we continue to run leaner, meaner deal shops?  

While innovation will dictate some of our collective directions we remain focused on providing resources to allow M&A firms to focus more on getting deals closed and less on worrying about preparing deals to go to market.

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