4 tips to build a recession proof M&A firm

Alex Karlsen

Working at an M&A firm during a down cycle can be tough. Deal volume is down, values are depressed and you go from feast to famine.

What if I told you there was a way you could ease the pain of a downturn? Well, there is!

Recession proof M&A firms have a lot in common – here are a few strategies you should consider adopting to manage through a downturn…

1. Sell something else

All of the most productive middle-market M&A firms sell something other than exits.

Having a low(er) cost service to offer as a point of entry, can help you keep the lights on while building long-term client relationships all at once. Ask yourself  ‘What am I an expert in? Can I sell it?”

During the last downturn, I supplemented my M&A income through a combination of turn-around consulting and custom financial reporting dashboard development.  At the time, future sell-side clients were willing to invest smaller amounts of money to gain visibility or see immediate improvement.

Can you do something similar?

The most common entry services in M&A are:

  • Stand-alone paid valuation services
  • Sellability/Viability analysis
  • Interim executive/management consulting services.

If you want to be truly recession proof, try offering something no one else is. The dashboards I was building sold for upwards of 20k per project. I charged what I could because no other M&A professionals offered something comparable.

2. Start capturing buy side fees

At CAPTARGET, we've seen a large uptick in M&A clients leveraging our origination tech and resources to find new buy side opportunities as well.

This means CAPTARGET's team can work for you to generate new buy side fee income.

How? Our team will do the research and outreach - when a target converts, we pass them right over to the client.

We do this by using our internal analysts and tooling, the same processes and tech we’ve built over the past 10 years doing prospecting and origination for both sides of the table.

3. Invest in visibility now

Does your firm only worry about marketing when things are slow?

If so, you will spend more per lead than firms who invest in marketing with consistency.  If you have the budget now, consider investing in long -term digital marketing initiatives like search ranking (SEO), your website’s lead acquisition strategy and conventional PR.  All of these things pay dividends for a long time.

Establishing yourself as the #1 search result for ‘your town sell my business‘ (for example) now, will cost you less than doing it later when the entire marketplace is also trying to accomplish the same thing. Our sister company Merger Labs helps M&A firms generate more visibility online. You may be surprised how affordable these services can be considering they will benefit you for months if not years to come.

4. Cut costs wisely: Do not sacrifice

What happens when deals dry up? M&A firms cut capacity, data access, and anything else they can to ensure they can weather the storm. Seems responsible right? Wrong! When they zig you have to zag. If competing firms jettison resources, consider leveraging cost-flexible resources like CAPTARGET to gain a competitive edge. We can provide short-term, low-cost access to analysts who are equipped with quality data. When competition for deals heats up, you can confidently assert that you have a full analyst team with all the needed support to run the process without sacrificing quality.

Not only is there a competitive benefit to working with a group like ours but we also allow you to focus on your primary job – closing deals. In lean times, knowing you can fully commit to servicing your client can be a very powerful thing.

Adopting these three strategies will improve your changes of thriving when everyone else is struggling!

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