The fact is, although 'on-market' deals have their place, the majority of great deals that intermediaries represent are not indiscriminately and mass marketed.
In recent years, the phenomenon of digital deal marketplaces has exploded, with around a hundred of them now in operation online. And with the ease and convenience of ready sourcing and prescreening via one website, it's no surprise that a huge array of buyers are now using these platforms.
Yes, online deal marketplaces can be a quick and ready way to find an easy (read: lower value) deal. But this model is rarely the way to get the quality deals that buyers want. Before you begin to factor these too heavily into your origination strategy, consider these points:
There are obvious advantages of a single platform model, where deals are brought automatically to the attention of subscribers. For example, they are easy to access and tend to be low cost (although some are now including success fees). They also allow efficient and easy communication with intermediaries, via the platform.
Certain key things are missing from these platforms, however. For example, only intermediary-represented on-market deals are listed, and every platform subscriber sees the same information. As the volume of listings grows, the competition for deals grows too and there is no access to deals off-maker - something that buyers really do require.
There are five things that buyers all need:
Buyers will meet these key needs through different means, but their analysis immediately shows why the over-use of deal marketplaces will never meet each goal.
Of course, on-market deals are fine and valuable in their own right. Sellers are committed and represented. But experienced buyers know that these deals tend to attract higher values than off-maker deals as the markets are so efficient. The ability to achieve the right margin may be lost.
Deal marketplaces are also home to the most aggressively-marketed deals - not just all aggregated deals. This means that you are likely to see the same heavily promoted opportunities across a variety of platforms.
It's equally true that you won't see most of the better intermediary-represented deals being mass-marketed on a deal platform. With thousands of specialist business sale intermediaries in business, the deals seen on these platforms simply represent low-hanging, heavily marketed and lower margin opportunities.
With intermediaries, the right opportunities will be introduced to 'good fit' buyers in a usual action setting. So, although represented, it's very likely that this kind of deal will never feature in an online deal marketplace.
It's best to remember that on-market deals are often priced at a premium, and fail to represent the entire intermediary-represented market of opportunities. competitive buyers must therefore be prepared to use strategies that access both types of deals; on and off-market. Various strategies exist to achieve these goals, but the starting point is to recognise that success will never come from wholly pursuing deals advertised on a common, public and heavily-marketed platform.
Interested in finding out more? Contact us today to find out how GVP can help you to achieve the best possible outcomes.