M&A Marketing Cost Evolution

February 6, 2014

The M&A and deal marketing environment continues to change rapidly.  Gone are the days where printing and signing letters of introduction was common place. An M&A  firm that chooses to not leverage technology in support of its marketing efforts has become a gun without bullets. Knowing this, does it make sense to use analog deal marketing anymore?

M&A has become increasingly competitive. Buyers have been placing a premium on deals with successful longevity and speedy delivery. In the last quarter of 2013, M&A activity surged over the previous quarter for deals sub $500 million. Aggregate transaction value doubled over 171 more deals and led to a 71 percent rise in average deal value. In this highly competitive environment, the leading firms are leveraging technology to control costs.

Until recently, to solicit companies to sell or private equity to buy, firms used mailed letters or posted flyers. These methods have become increasingly costly in comparison to cheaper, more readily available technologies. Let’s calculate the typical costs of mailing a marketing letter to 500 potential clients:

 

ITEM UNIT COST TOTAL UNITS TOTAL COST
Printing 2 Color Letter .05 500 $25
Printing Envelopes .06 500 $30
Letter Folding .01 500 $5
Printing On To Letter Shell .04 500 $20
Inserting Cost

.015

500 $8
Base Rate, Pre Sort .03 500 $15
Postage .26 500 $130
       
Total .456 500 $233

The total is $233, and on top of this the layout design will justify an additional cost.

Compare this to an online email distribution platform, like Mail-chimp or Constant Contact. For 500 targets, the cost would range from free (yes free) to  $10 per month for the subscription. The design and set-up for this marketing is easy and intuitive (for those that are design-challenged, though, CapTarget can help the development for a fraction of the costs of design for printed letters).

The logic seems simple. You can pay $258 for the printed letters, or use media marketing for 3% of that price. Digital marketing is cheaper, faster, and scalable. The marginal cost and required labor of an increasing target directory is negligible, which will grow your company quicker.

Additionally it is worth considering that direct mail provides very little visibility, while e-based marketing allows for deep drill downs in rich data that supports on going campaign performance improvement.  

The bottom line is printing letters, regardless of the application, is old news, less effective and more expensive.  Use less paper, get better results, save money!