Comparing Corporate Development Origination Strategies

1. The Internally managed origination effort

This category describes companies with internal corporate development staff who do not rely on outside resources.  These teams are often relatively small compared to the overall size of the company they serve.  In fact, it is not uncommon to see corporate development “teams” of just one person at companies as large as 1BD in annual sales.

Pros of this Strategy

• No finder or success fee cost load.
• Full visibility.

Cons

• Fixed cost model can be cost prohibitive to smaller companies looking to grow through acquisition.
• Requires expertise and best practices to be developed often without outside expert support.
• Requires significant process management when prospecting, tracking leads, developing and testing communication etc.

2. Buy side firms

While many private equity buyers rely in part on buy side firms, much fewer corporate buyers have adopted the same strategy.  Some corporate buyers will retain a buy side firm to work in conjunction with an internal corporate development hire.

Pros of this Strategy

• Most of cost is paid on success.
• Allows for buyers to focus on lead vetting and transaction management rather than research and outreach.

Cons

• Requires payment of a finder’s fee and/or retainer which can be significant.  Unlike investment funds, corporate buyers are not spending other people’s money and are often adverse to adding up to 5% in fees to the cost of a deal.
• Minimal visibility – buy side firms rarely have a requirement to provide reporting or any insight beyond the “lead” or prospect.
• Leads are often not truly proprietary. The buy side firm chooses which of their clients see opportunities and when.

3. CAPTARGET origination

Our sourcing services are considered a ‘best of both worlds’ approach.  We combine the best elements of (1) internal sourcing and (2) buy side supported search efforts.

Rather than representing ourselves as a third party like a buy side firm, we act as an extension of client’s corporate development arm.  This means we source both direct and indirect opportunities for you.  This is all managed by CAPTARGET, including the prospecting, outreach and vetting of opportunities.

Pros of this Strategy

• Low monthly costs with no success fee payment required.
• Full visibility via reporting, and real time analyst support.
• True proprietary lead ownership with all leads owned by a single buyer.

Cons

• None! Its lower cost, fully supported and used by corporate buyers worldwide.

Choose the right deal origination service level for your firm here.

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