Deal Origination – how CF teams succeed, or not!

kirstymcgregor
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“Deal Origination” means different things to different people.  So, let me start with a definition in the context I’m discussing.  For me, working predominantly in the world of SME Corporate Finance and alongside general practice accountancy firms, pure “Deal Origination’ is the way you create a deal, where previously there wouldn’t have been one.  And it’s the absolute key to a successful Corporate Finance service in an accountancy firm!

If you have the ability to home-grow your own deals, you can count on a much greater source of future work than if you merely rely on new work ‘landing on your desk’ from your more proactive, savvy and ambitious clients.  And wouldn’t we all like a client base full of these SMEs?  But we all know that in the real world, owner managers are a much broader spectrum, and as an accountancy profession, we need to be mentoring our clients to become better business owners, so that we can give them the confidence to take their business to the next level. 

Part of that strategy may be doing an acquisition to grow their business, or it may be financing their business appropriately to take advantage of new organic growth opportunities, and for all business owners at some point in their lives, it will be selling their business for the most value.  How many accountants can truly say they have helped their clients grow their business’ end value?  What difference have you made?  Or have you just reported on the clients’ own efforts?  But let me not stray into my worries about the future of the accounting profession here, that’s for another time!

In the market I work in, ‘Deal Origination’ is far more than finding a buyer for your client who wants to sell.  Or finding that target for your client who wants to grow by acquisition.  It’s working alongside (all of) your clients to inspire them to take that step to consider M&A, or recognising that they need to start planning for their exit, and to start to create a different, but more valuable and sellable business which will be more attractive to more purchasers.  The vast majority of clients are wary of doing either of these, and if as an adviser you aren’t able to affect your client’s natural inclination to merely carry on as before, you’ll not be doing them a favour at all.

In The Corporate Finance Network, we work with our firms to show them how to create their own deals.  To build a longer term dealflow, often 2 or 3 years of pipeline.  To guarantee them a source of deals well into the future. And how do we do this?

When you’ve identified the direction your client needs to be concentrating on (whether organic growth, acquisitive growth or exit), we advocate a consistent and persistent message.  A slow, gentle but clear approach.  From all members of the firm.

Using a mixture of scorecards, illustrations, work programmes and checklists, we first help general practice teams to spot the opportunity and then to stay ‘on message’ over a period of time.  To repeat the same advice, to gently bring your client to a point where they recognise the way forward, and to understand the process to get there.  This can take years.  And rightly so.  Most Corporate Finance transactions are life-changing for our clients, and they need to be considered and committed to.  Deals which fall over at the eleventh hour are typically those which have been rushed into, by one side or the other.  And that helps nobody.

This takes a mixture of team training, supporting resources, and products which make the process of a transaction more efficient for the firm.  We want our firms to make a larger return on the wins, and minimise the losses for those deals that don’t complete – which there will be, it’s inevitable that not all transactions are successful when you are dealing with human nature.  Rarely will an SME deal fall over for business or financial reasons.  More often than not, it’s personal reasons, or seemingly baffling nonsensical reasons (which just means you haven’t understood the full picture).

To limit the risk of these incomplete deals causing you a cashflow problem, you need to have a large spread of work.  To stop the boom & bust scenario seen by many CF departments, but to have a gradual growth in fees with as few peaks and troughs as possible.   Which brings me back to my original point – growing your own client work will provide a larger pool of deals and stop reliance on a smaller pot.  Deal Origination, essential skills to help you sleep better at night!

[If you'd like to know more about how to join The Corporate Finance Network and how we can support your firm, please don't hesitate to get in touch [email protected]]

About kirstymcgregor

About kirstymcgregor

Expert in corporate Finance for SMEs - which is a different subject to 'corporate finance' per se & we are the UK's experts in it!

Top 5 specialties:

  1. Assisting great general practice accountancy firms to grow their corporate finance service for SME clients:
  2. Revolutionary thinking - developing unique products and applications for SMEs
  3. Coaching accountants - technical updates, latest industry developments, new products/contacts in the market & peer group support
  4. Promoting accountants - developing a recognisable national brand
  5. Supporting accountants - providing access to resources & skills normally only in the domain of the large nationals

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