Private Equity Firms
Private Equity Firms
| Common PE Problems | Litefirm’s Solution |
|---|---|
|
Limited in-house capacity for proprietary outreach |
Acquisition-Target Sourcing - We execute a custom |
|
Limited in-house capacity to evaluate businesses |
Acquisition-Target Screening - We conduct preliminary |
|
Poor quality and limited amount of data on businesses |
Acquisition-Target Screening - We gather the information |
|
High cost of compensating, hiring, training, and retaining personnel |
Turnkey Workflow Automation - We economically automate |
|
Not seeing all relevant deals on the market |
We can manage Intermediary relationship management |
Maximizing NPV of Proprietary Outreach
We recommend starting with a baseline approach that we are confident will have positive NPV. From that baseline, we can increase the investment per target until NPV apparently declines.
For example, we can invest more in message personalization, which improves conversion because it makes owners feel respected and helps them see you understand their specific business and its possible strategic opportunities.
We illustrate below that if spending 400% more per target increases the success rate by just 33% then you are better off spending 400% more per target.
- If your bottleneck is finding good deals, then the expected value of a “high-quality seller lead” (one that has a 10% chance of closing) is perhaps $200k = 10% of the economic value of closing a $10m deal, which might be $2m.
- If your bottleneck is your time, then the expected value of the same seller lead is perhaps $25k = 10% of half of an intermediary’s commission (assuming buyer and seller split the savings), which might be $250k, or half of $500k.
- Suppose we go with the lower figure of $25k.
- Suppose that spending $1 per target results in a 0.3% chance of getting a high-quality seller lead. Then the NPV of that investment = 0.003 * $25,000 – $1 = $75 – $1 = $74.
- Suppose that spending $5 per target results in only a slightly higher chance (0.4%) of getting a high-quality seller lead. Then the NPV of that investment = 0.004 * $25,000 – $5 = $100 – $5 = $95.
- Investing more per target increases NPV because $95 is much higher than $74.
Custom research & personalized email & LinkedIn outreach.
