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Deal Signals

    We specialize in identifying companies which are flashing “deal signals”, indicating that they are seeking or are about to seek outside capital.  We find that most companies are not motivated to take in outside capital unless the company experiences a trigger event of some sort.  For example, a company may not be interested in acquiring an outside investor until the CEO has a 60th birthday, and starts to think about retirement, succession planning, and liquidity.
    The challenge is that many trigger events are private and not readily observable.  However, we have developed a proprietary algorithm which identifies these trigger events and makes predictions as to the likelihood that a given company will take in outside capital. We have listed below some sample signals which indicate that a company likely will be receptive to our inquiry, or an inquiry from another outside investor.

Status of major equity owner

  • Large corporation shedding subsidiaries
  • Major owner with one time tax incentive to divest, e.g. due to tax law charge
  • Succession battle
  • Death, disease and divorce (“the Three D’s”)

Status of CEO

  • Serial entrepreneur seeking his next adventure
  • Older CEO seeking retirement
  • CEO getting tired / acknowledging limits of his or her competence
  • Death, disease and divorce (“the Three D’s”)

Corporate performance

  • Rapid growth, which may require additional working capital
  • Underperforming/distressed
  • Geographically concentrated.  A business that is highly geographically concentrated is usually one with a high, defensible market share, which simultaneously has a lot of growth opportunity outside of its immediate vicinity.

Industry/economic trends

  • Consolidation in industry.  Aside from competitive pressure, seeing a competitor make a large cash gain from exiting also prompts a CEO to think about liquidating his or her own equity.
  • Competitors raising capital, which creates competitive pressure to raise capital as well
  • Large short-term opportunities, e.g., the chance to buy another related company
  • Growth sector
  • Outside economic pressure, e.g., the 2008-2010 credit crunch