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Detailed Step-by-Step Explanation for Each Stage from thesis to exit

Written By: Gerald O’Dwyer II

The PE Guru — Blackmore Partners, Inc | October 15, 2024

Stage 1: Define Your Deal Thesis

Step-by-Step:

    1. Evaluate Your Experience: Look at your industry background and leadership roles.
    2. Identify Gaps in the Market: Find underperforming companies, fragmented sectors, or emerging trends where PE capital can accelerate growth.
    3. Create a Hypothesis: Formulate a specific deal thesis based on market gaps.
      • Example: An automotive exec creates a deal thesis around consolidating Goodyear licensees for aftermarket services.
    4. Validate with PE Firms: Engage PE firms to review your thesis.

Comparison:

    • Without PE: You rely on your personal funds and networks to bootstrap a business, limiting your scope.
    • With PE: You leverage significant capital, industry expertise, and strategic partnerships to scale faster and reduce risk.


Stage 2: Build Your Acquisition Funnel

Step-by-Step:

    1. Research Target Companies: Use databases like PitchBook, Cyndx, and industry reports.
    2. Create a Target List: Start with 50 prospects, track their size, revenue, ownership structure, and potential.
    3. Refine the List: Narrow down to 10-15 high-potential targets after detailed analysis.

Comparison:

    • Without PE: Building this list could take months, limited by personal connections and lack of research tools.
    • With PE: You use advanced databases like PitchBook to identify targets more efficiently, speeding up the acquisition funnel.
 

Stage 3: Develop Messaging to Owners

Step-by-Step:

    1. Draft an Introduction Email:
      • Personalized to the owner, highlighting why you’re interested in their business.
      • Example: “I’ve been following your company’s growth in the X market and believe there’s significant opportunity for us to partner.”
    2. Prepare a Voicemail Script: Concise, professional, offering value.
      • Example: “This is [Your Name]… I’d like to discuss opportunities to accelerate your business in partnership with our investment platform.”
    3. Follow-Up: Set reminders to follow up 7-10 days later if no response.

Comparison:

    • Without PE: Your messaging may lack credibility without an investor behind you.
    • With PE: Your messaging is stronger, as owners are more likely to respond knowing there’s capital backing.
    1.  

Stage 4: Attend Industry Conferences

Step-by-Step:

    1. Identify Key Conferences: Pick 6 BlackmoreConnects and 4 ACG conferences aligned with your target industries.
    2. Set Meeting Goals: Before attending, schedule 5-10 meetings with PE firms and owners.
    3. Prepare Introductions: Develop a 30-second intro tailored for these events.
    4. Network Aggressively: Engage with new contacts and follow up after the event.

Comparison:

    • Without PE: Attending on your own may result in fewer opportunities due to lack of credibility and brand power.
    • With PE: You’re perceived as a serious player, which opens more doors at conferences.

Visual Analysis:
Let’s create a comparative chart for ROI of attending six BlackmoreConnects conferences versus individual networking methods:

Metric

BlackmoreConnects

Individual Networking

Average New Connections/Conference

40-50 executives

5-10 executives

Total New PE Firms Connected

60-90 firms (over 6 conferences)

10-15 firms (over 1 year)

Cost

~$10K for 6 conferences

~$5K (self-led networking)

Estimated Deal Leads

2-3 solid leads per conference

1 lead/year

ROI (Est. Value)

$150K-$500K (potential deals)

$50K-$100K (potential deals)
 

Stage 5: Develop and Track Acquisition Funnel

Step-by-Step:

    1. Create a CRM System: Track each prospect, stage of engagement, and last contact.
    2. Set Weekly Goals: Reach out to 10 prospects per week.
    3. Update Funnel Status Weekly: Keep detailed notes on progress for each target.

Comparison:

    • Without PE: You might rely on spreadsheets, but this lacks the sophistication of CRM systems and slows down efficiency.
    • With PE: Using a CRM helps track multiple prospects and improves response times.
 

Stage 6: Continue Building Relationships with Owners

Step-by-Step:

    1. Schedule Regular Follow-Ups: Send emails every 2-3 weeks to stay top-of-mind.
    2. Host Introductory Calls: Focus on understanding their pain points and how you can help.
    3. Deepen Engagement: Use insights from each call to tailor future conversations.

Comparison:

    • Without PE: Limited by how many owners you can contact personally, reducing engagement scope.
    • With PE: Access to greater resources allows for more thorough and systematic follow-up processes.
 

Stage 7: Submit IOI & LOI

Step-by-Step:

    1. Indication of Interest (IOI): Formalize your interest with an IOI that includes preliminary valuation.
    2. Letter of Intent (LOI): After IOI approval, submit a legally binding LOI outlining key terms.
    3. Example LOI Clauses: Purchase price, deal structure, timeline.

Comparison:

    • Without PE: You may struggle with legalities and the capital needed to progress to LOI.
    • With PE: You have the financial and legal backing to move quickly into an LOI.
 

Stage 8: Invest in the Deal

Step-by-Step:

    1. Secure Funding: Arrange personal or external financing for your portion of the deal.
    2. Demonstrate Commitment: Put “skin in the game” by investing in the deal alongside PE firms.
    3. Monitor Progress: Stay engaged in post-deal growth to optimize exit potential.

Comparison:

    • Without PE: Personal funds are often limited, restricting the size of the deal.
    • With PE: You leverage external capital, significantly increasing the deal size and potential returns.
 

Deeper Comparative Analysis:

  • Without PE Support:
      • Challenges: Slower growth, lack of networking tools, fewer opportunities, and smaller deals.
      • Risk: Higher personal financial exposure and limited access to deal flow.
      • Outcome: Less chance of scaling and achieving substantial returns.
  • With PE Support:
      • Advantages: Faster access to deals, broader network, and larger acquisition opportunities.
      • Resources: Professional networks, financial backing, strategic partnerships.
      • Outcome: Higher potential for success, more lucrative exits, and greater deal flow.
 

Conclusion:

This roadmap breaks down each stage with clear actions, examples, and financial reasons that show how interconnected steps lead to successful deal outcomes. The PE game requires not just networking but a strategic, well-documented approach involving both relationships and tactical investment in conferences, deal theses, and acquisition funnels. By following this roadmap, executives can navigate the complex PE landscape more effectively.