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Business Development Strategies In Flux: How Deal Professionals Are Approaching A Post-Covid Landscape

By Lou Sokolovskiy, Founder & CEO at Opus Connect
October , 2020

There is no question that Covid-19 created a stark situation of before and after in nearly all industries. Things are different now, more digital, virtual, and slower to generate results. Expectations must of course be adjusted accordingly as we make our way into uncharted waters within modern business. As we begin to return to full speed, many will face an uphill battle as deal flow begins to normalize – making now an excellent time to take the temperature of middle-market M&A professionals at the beginning of Q4 2020.

Opus Connect sent out a business development survey in September 2020 to speak directly with deal professionals that have gone through the challenges that Covid-19 posed and are beginning to come out the other side – a bit battered, but still hanging in. The goal of this piece is to provide the findings of that survey and give our audience a quick yet thorough picture of the present deal flow landscape.

Obviously, the travel industry has been hit extremely hard and that is reflected in our survey results, as 79% of our respondents had yet to resume regular business travel at the time of this survey. In a similar vein, virtual settings are working well, as the industry adapts to Zoom life, to help connect with their peers and allow networking at virtual roundtables much like our Opus Connect events. A robust 95% of professionals told us that virtual settings are working for them, thankfully enabling some aspects of the deal flow process to continue.

However, that doesn’t mean that deals have returned to previous levels– just that professionals are adapting as best they can given the circumstances. Responses very clearly indicate that deal flow is not where it was, with more than half of the survey respondents (57%) telling us that while there is “a surge of activity on the sell side and many inquiries from buyers,” deal flow is not yet where it needs to be to constitute a recovery from what McKinsey and others have termed a “Great Reset” or a “Great Pause” during the Covid-19 lockdown. When expanding upon that query, many professionals rated their deals at around 50% of normal, with a few rating it 20% or lower. It is worth noting that our pool of responses come from professionals in a variety of industries, so some variation is to be expected, but the average response indicates that there is a long way to go before deal flow is as robust as it was in years prior.

Several of those surveyed mentioned that restructuring activity has picked up, which makes sense as companies faced with less revenue need to adapt, streamline, and shrink according to global economic activity. Middle market M&A professionals have closed deals, with slightly more than half (52%) of our professionals telling us that they closed deals since the start of the pandemic. The lack of deals closed demonstrates that this is a 50/50 endeavor – but everyone is facing those same odds. Meeting in person is still favored, but less important as the industry taps into what were likely underutilized methods of conducting business virtually, with one response noting that they had “launched several new deals and have a huge backlog to be launched in the next three to four months.”

Strategies for business development are at the heart of the middle market M&A industry, and it was illuminating to hear directly from professionals as they implement both tried-and-true methods for business development and also bring new ideas to this changing landscape. A few responses we’d like to highlight include the following:

  • A greater focus on liquidity and leverage
  • Organizing more webinars and publishing more research
  • A stronger interest in local companies that can be reached by a drive rather than a flight
  • Utilizing virtual meetings to reach groups and meet people that I probably would not have otherwise; utilizing virtual formats to stay top of mind with referral partners and potential clients
  • Focus on add-ons while being patient with new control platform opportunities; more junior capital/structured equity deals are appearing in this uncertain liquidity/financing environment
  • Focus on special situations (distressed) businesses; have leveraged webinars and direct emails to keep in contact with clients and prospects

Some excellent strategies from respondents that can be implemented by anyone in the middle market M&A industry include these five actionable suggestions:

  • Make more phone calls, send fewer emails. More humor, less dwelling on the depth of the current issues. More manners, less “onto the next Zoom/call.”
  • Increase your virtual, one-on-one coffees instead of the typical quick catch up phone calls to spend a little more time with the business contact and achieve a higher quality of connection
  • Mine existing networks to convert contacts into clients
  • Create a system of referrals to have on hand during calls to fill a potential client’s needs right away (greater reliance on word of mouth)
  • Focus more on understanding the non-business aspects of a client/partner’s circumstances to orient the stress levels, and challenges on timing

The last portion of our survey focused on harvesting, maintaining, and building relationships, which are the three phases of business development that Opus Connect targets as we strive to increase our members’ network of meaningful and long-lasting connections. We asked how M&A professionals were moving through these phases in 2020, with nearly every response in the “harvesting phase” mentioning more virtual and digital outreach, attending webinars and similar events, and focusing on one’s LinkedIn connections and creating new relationships. Many were more focused on the “maintaining” and “building” phases, with one respondent noting that it is:

“…more important than ever to boost communication levels with our current investors in order to maintain and continue to build those existing relationships. We have been successful in ramping up communications with our current investors with thorough transparent operating updates, consistent virtual meetings & timely updates regarding new opportunities.”

Other excellent thoughts focused on the realization that being a “resource for others whenever possible,” as well as “keeping connectivity with existing relationships and strategically targeting new ones” was proving the most valuable in the long-term as we collectively forge ahead in the aftermath of Covid-19. One respondent in particular shared that they are “executing on deals currently in process and building a deeper rolodex of financial sponsors across different geographies, industries, deal size, and deal structures,” which provides a good model across multiples industries going forward.

We encourage our network to use this information to remain proactive rather than reactive as the deal pipeline picks up, no matter the industry vertical. Of course middle-market M&A has been deeply affected by this period of turmoil, but the road ahead shows opportunity for greater connection through thoughtful business development strategies that aim to create more robust networks, stewardship of existing relationships, and a more agile approach to deal flows taking place in a digital future.

Independent Sponsor Report 2020: A Window Into Middle Market M&A After Covid-19

By Lou Sokolovskiy, CEO & Founder at Opus Connect
October 2020


Independent sponsors and capital providers within Opus Connect’s extensive middle market M&A network are a valuable source of insight into the current state of their deal flow during the first eight months of 2020. Our findings in this report seek to illuminate the ways in which independent sponsors have both adapted to change and where they continue to pick up and go forward after a pause during the global economic slowdown. The inherent variability in the independent sponsor model led to a diversity of responses within participants’ deal flow and access to capital.

This report provides a collective knowledge base for how a cross-section of independent sponsors are responding to changes in their deal structures. Opus Connect’s goal is to act as a resource and deal community for current and potential members, conducting this research with the goal of providing a window into the current state of the middle market. A tool for future success, the information gathered aims to promote awareness of current practices as well as the speed and growth potential for deals going forward. Business development strategies are continually changing and growing alongside an industry that is now seeing greater utilization of digital resources and new technologies as some – but not all – parts of the deal process transition to virtual interactions and events. As the global scenario changes, business processes adapt alongside it.

Thank you to our esteemed survey respondents in this market for sharing their timely experiences and discussing the impact of Covid 19 with us as we all cope with the curveballs of 2020 and the unexpected issues that arise from shifting the ways in which we do business during a global pandemic.

Snapshot of the Family Office Investing Universe: A Q&A session with Michael Felman of MSF Capital Advisors

By Nancy Vailakis, Senior Advisor at Socium Fund Services
October 6, 2020

Michael Felman is President and CEO of MSF Capital Advisors, a family office advisory firm with 60+ clients around the globe.

Given the complex variety of needs represented by such a large family office base during a 20 year firm history, Michael has a unique and informed view of the current investing opportunity set. His knowledge spans all popular strategies and structures in play today, from complex private credit funds to independent sponsor deals across a broad array of sectors and geographic locations.

Michael has a deep understanding of how and why families invest and has outlined his views in this interview.

Vailakis: Thank you for agreeing to share your knowledge with Opus Connect members, Michael.

In recent years we have seen a meaningful increase in family office co-investment and independent sponsor deal activity. As you advise around 60 families on such allocations, how would you describe this shift?

Felman: Thank you for having me, Nancy.

There has definitely been a shift to more direct investments by family offices in recent years. Some of the reasons for that shift include:

  1. Payment of fees.
    Numerous studies have shown that fees over time significantly reduce your overall returns.
  2. Return of capital.
    Many funds, whether private equity or venture capital, have not done an amazing job of returning capital to their investors.
  3. Selection Bias.
    There is a risk of selection bias in any co-investment opportunities offered by funds.
  4. Generational inclinations.
    In many instances, the next generation of younger family members may be more averse to the “blind pool” concept as they tend to want more control over their investments. I’ve found that they are also showing this tendency through their philanthropic giving patterns.
  5. Family member involvement.
    Direct investments provide a way for the next generation to become more actively involved with the family office.

I believe there is still a role for independent sponsors to play as these shifts continue. Independent sponsors often help family offices become knowledgeable about their specific strategy sectors and have typically already identified their investment targets, thus negating the “blind pool” model.

Vailakis: Some families, not all, prefer to partner on deals shared with them by other families they’ve participated with many times before. Trust is a clear component of all deal making, but please speak to other aspects of this dynamic.

Felman: With respect to direct deal making in the family office sphere, there are many factors, but here are my top questions or considerations:

  1. As you pointed out, Nancy, trust is the number one factor, really in any investment arrangement including direct deal making.
  2. Does the partner have subject matter expertise that could benefit the family?
  3. How well does the partner know the political landscape if this is a foreign deal. Are they on the ground in the country being invested in?
  4. Can the partner open new distribution channels in the situs of the investment?
  5. What are the long terms goals of this partnership? Is it a buy and hold or an improve and sell opportunity?

Vailakis: What investment sectors and geographic locations are of most interest to the families you currently serve? How did COVID-19 related considerations shift such interest?

Felman: The majority of the families that we serve are not located in the United States. Most of our investments are overseas. We remain interested in developing markets as they are, in our opinion, presenting the greatest growth opportunities.

COVID-19 made us think more heavily about supply chains and how fragile they are. Obviously, there has been considerable growth in e-commerce, internet usage, etc. since the crisis. Cybersecurity and cloud computing are two areas of investment focus for our group.

Vailakis: Over the course of your time running MSF Capital Advisors, what has changed in the family office investing universe and where do you believe trends could evolve from here?

Felman: COVID-19 has created a sea change in how people work. Most people are now working remotely. I don’t see this trend changing any time soon.

MSF Capital Advisors has always been virtual as team members are located around the US and abroad. I’ve been told that other family offices are looking closely at this model if they haven’t implemented it already.

This new model does however have implications from an investment perspective. Obviously, you don’t need as much or any office space. The industries that serve office workers will be negatively impacted. There is more automation coming in the supply chain through robotics, etc.

At MSF Capital Advisors, we like to get ahead of the curve on our investments as the old saying goes, and “skate to where the puck is going and not to where it is presently.”

Vailakis: Do you have any advice for families looking to start investing in direct deals, either through independent sponsor engagement or otherwise?

Felman: Look, there is no free lunch here. If you are looking to make direct investments to save money, then you are often enough being “penny wise and pound foolish.” You could end up costing yourself and your family more money if you aren’t in a position to assess the direct deals well, if, for example, the sector is unfamiliar.

If you are at a point in your life where investments are not your main focus, then I would stick to investing in funds. If you still want to be somewhat active, then I would invest through an independent sponsor or hire a team to reside in-house or as part of a separate entity.

Many more family offices are starting outsourced private equity teams that have only the family as a capital source. Some of them are launching funds for other families to participate in.

Vailakis: As many are anticipating a more comprehensive corporate default cycle in the next 6-18 months, what investment plays seem less risky / more likely to preserve capital and capture upside, as we are poised for a deeper recession?

Felman: I agree there will be a tsunami of corporate and real estate defaults coming in the next 6-18 months. I am not sure what investments will be less risky but there will definitely be a need for capitalfor recapitalizations, workouts, origination, etc. I believe patient capital will be in the ‘cat’s seat’ ready to pick off some plum opportunities.

Thank you so much for providing me this opportunity to share my views, Nancy.

10 Potential Deal Breakers When Acquiring a Franchise System

By Andrae Marrocco , McMillan LLP

Franchise systems present a valuable investment proposition for strategic and financial investors. The appeal of robust, long-term, and diversified royalty income streams, proven business concepts, potential for scalability and expansion, shared expansion costs, and the goodwill and strength of an established brand has increasingly caught the attention of private equity, family offices, and other sophisticated acquirers. Set out below are several critical franchise specific considerations for investors exploring the acquisition of a franchise system?

Immediate Red Flags. Certain deficiencies rise to the level of immediate red flags including the following. (1) High franchisee turnover and/or poor franchisee satisfaction/culture within the system. Franchise systems with such attributes do not thrive and, in many cases, may be on the decline. (2) Weak unit economics, declining same-unit sales, or challenging broader economic conditions (eg emerging or shifting market dynamics). Franchise units are the engine of the franchise system; if not functioning optimally, the franchise system’s value is impaired. (3) Overall lackluster rating on legal documentation, system compliance (and enforcement), and significant litigation with franchisees and third parties. The latter elements individually may be explainable and ameliorable, but grouped together could be a perilous sign.

Weak Brand Strength/Infrastructure. Franchise systems must possess a proven replicable business concept that is adaptable across markets. There ought to be a sound platform and associated infrastructure to conduct the existing corporate operations and units including manuals, training programs, ongoing consultation, franchisee communication strategies, compliance monitoring, marketing, technology, processes for modification, and updating products and services, etc. Strong franchise systems possess a blueprint for building out that platform and infrastructure (for future growth and expansion).

Poor Unit Economics. Investors must analyze the certainty and recurring nature of the ongoing royalty revenue (together with other revenue such as technology fees, supply arrangement fees, etc) independently of one-time fees (eg initial franchise fees). Additional important inquires include the following. (1) Consider carefully the remaining term on franchise arrangements and the likely percentage of renewals together with the age, demographic, and level of sophistication of the franchisee population, jurisdiction and regional trends or differences, and payment delinquencies. (2) Watch for suspect sources of revenue (eg self-dealing) as well as concentration among small pools of franchisees. (3) Explore the future potential for royalty stream growth including through increased same-unit sales, an increase in the franchisee population, or the introduction of new products and services.

No Protection. The core assets of a franchise system are the intangible assets such as intellectual property (trademarks, trade secrets, copyright, patents, etc). Has the existing franchisor taken appropriate steps to protect its owned or licensed intellectual property rights (through registration, contractual covenants, conduct with franchisees etc)? Investors should assess whether the franchisor has conscientiously policed its intellectual property rights. Equally important is the investigation of whether there is scope to protect the intellectual property in jurisdictions that form part of the growth strategy.

Impaired Human Capital. In some cases investors will look to keep existing management (or at least part of it) in place. This necessitates due diligence on each member of the team, their current roles and responsibilities, confirmation that all of the typical franchise system roles and functions are covered, together with an analysis of where things might fit post-acquisition. A number of circumstances with respect to human capital can create inauspicious conditions. For example, the imminent retirement of key personnel like senior franchise development or franchise operations managers where there are no trained replacements. Of equal concern is the risk that key personnel will leave shortly after completion of the acquisition.

Unhealthy Systems. Franchisees have been referred to as the “lifeblood” of a franchise system. It stands to reason that the franchisor’s relationship with franchisees is critical to the health of the system. If that relationship is characterized by constant tension, disagreements, defaults, and a high turnover of franchisees, it may not bode well for any incoming franchisor. The existence of franchisee associations can be a symptom of a previous or current unhealthy system (eg particularly where the association was established for the purposes of mounting a challenge against the franchisor). On the flip side, the non-existence of a franchise advisory council (typically established to permit franchisees a forum to voice their ideas and concerns, and to have regular meaningful communication with the franchisor) can also be symptomatic of an unhealthy system.

Breaking the Rules. Franchising has become increasingly regulated and is also an increasingly litigious area of law. The remedies available to franchisees under franchise laws are strict and extreme. It is critical that franchisors be in a position to demonstrate compliance with all applicable franchise laws. This includes keeping appropriate documentary records to establish that: (i) franchise sales, disclosure, and other processes were carried out in a manner that complied with applicable franchise laws, (ii) any earnings projections or estimated operating costs provided were based on reasonable assumptions and were appropriately substantiated, (iii) there has been ongoing compliance with franchise laws. Non-compliance with franchise laws creates significant exposure for acquirers, and is not taken lightly in their due diligence and assessment.

Bad Deals. The franchisor’s contractual rights and obligations with respect to its franchisees frames the franchise system’s legal structure. A second-rate approach to drafting, negotiating, and implementing franchise agreements (and ancillary agreements and arrangements) with franchisees may render a franchise system unacceptable. Numerous versions of franchise agreements with different terms, “one-off” side deals, and/or poor record keeping may make understanding the rights and obligations vis-à-vis the franchise system a lengthy, complex, and uncertain undertaking. Any respite or concessions made with respect to a franchisee’s financial obligations may be harmful to the economic assessment and viability of the franchise system.

Stuck or Prohibited. There may be unfavourable or prohibitive provisions that stand in direct opposition to growth and expansion plans. For example: (i) near ending or extended term and renewal provisions (depending on the investors plans may be of concern), (ii) the precise breadth and limitations of system modification rights and obligations may be incongruent with strategic plans, (iii) the nature and scope of territorial rights granted to franchisees (including exclusivity terms) may stifle growth strategy and structure for particular regions (for example, where large development areas have been granted with long development terms), (iv) inferior reservation of rights may prevent expansion through alternative distribution channels or the achievement of economies of scale (eg not being able to leverage the same infrastructure across multiple franchise systems), or (v) termination rights that are too lax for franchisees and/or too onerous for the franchisor may also present challenges.

Outdated Technology. Franchisors face a precarious three-way intersection of increased accountability and regulation over consumer privacy, a growing volume and sophistication of cyberattacks on consumer data, and the expanding boundaries of franchisor liability for matters arising at the franchise unit level. It is imperative that franchisors maintain, update, and make continual investments in their technology systems to ensure that they are operating at optimum levels. Looking at technology as an asset, in many cases, technology is a critical aspect of the competitive advantage that franchise systems have in their particular market. Accordingly, aging technology can translate to loss of market share.

Industry-specific considerations exist in many M&A transactions, franchise M&A transactions are no different. An understanding of the franchise business model, the underlying assets, and the sorts of issues and challenges that can arise in that context is critical when looking to acquire a franchise system.

About the author:

Andrae Marrocco is a partner in the Toronto office of McMillan. His transactional practice is focused on advising domestic and international businesses on franchise & distribution matters and corporate/M&A transactions. He has particular expertise in complex franchise arrangements, franchise system mergers and acquisitions, and cross-border/international transactions. Andrae can be contacted at

The contents of this article formed part of a longer article co-authored by Andrae Marrocco and Mike Bidwell, President and CEO of Neighbourly, a US franchisor with over 20 franchise concepts in the repair, maintenance, and enhancement of homes and properties sector (with over 3,300 ultimate franchisees).




Connection Success: WestCape Advisors

Opus Connect’s mission is to form connections and foster relationships between professionals in the private equity, banking, finance and other transactional industries in order to improve outcomes in deal flow and negotiation. We all know that it can take a huge amount of effort and years of networking to achieve results, and so when those results come to fruition, it’s important for us to highlight and congratulate the parties. A few months ago, we hosted our LA Deal Connect in which we interviewed several members of Opus Connect about their experiences and what is so valuable for them about coming to our events. Not surprisingly, a few of these interviewees told us about actual deals they’ve closed as a result of relationships forged through Opus Connect.

One such deal was the closing of a $6MM senior credit facility, consisting of a $4.5MM revolving line of credit and a $1.5MM term loan from TAB Bank. Opus member Cary Hurwitz, of WestCape Advisors, a division of KEMA Partners LLC, served as the exclusive financial advisor to The Triangle Group in the transaction. For the past 40 years, The Triangle Group has provided 3PL services, including transportation, warehousing, fulfillment, and supply-chain management to major retail enterprises, global brands, and the manufacturers that support them. The company operates from two central hubs in California and New Jersey, supported by warehousing and distribution depots nationwide which, combined, cover more than 1.5MM square feet.

Proceeds went towards supporting the company’s ongoing double-digit expansion, the on-boarding of two new national retail customers, and the extension of services to its already impressive client base. The Triangle Group had been largely self-funded prior to this financing, but its rapid growth called for more efficient access to capital from a financing partner that could appreciate the growth opportunity and understand the intricacies of the company’s operations, assets, and cash flow. Caryn Blanc, owner and Managing Partner of The Triangle Group expressed that “WestCape Advisors played a critical role in analyzing our situation and structuring a transaction that was favorable for all parties. This financing has enabled us to acquire key infrastructure and support and to continue serving our valued customers in the exceptional manner they have come to expect.”

Hurwitz commenced the process of finding a loan for The Triangle Group with a number of candidates and prospects. One prospect was Opus Connect member Michelle Rogers of Corbel Capital Partners, with whom Hurwitz discussed the transaction at an Opus Connect event. Rogers recommended an ABL lender, TAB Bank, which was a perfect fit for the Company and transaction. TAB quickly and aggressively jumped into the process, resulting in the above transaction. Opus Connect congratulates Hurwitz and WestCape Advisors on this successful endeavor, and also applauds Rogers for using an extremely effective business development tactic that we encourage all of our members to employ – the personal referral.


Lou Sokolovskiy
Founder/CEO, Opus Connect

Guns v Butter: Understanding the Present Value of Business Development

“Many people have a hard time understanding the present value of business development because they see it as a nebulous concept that may or may not help them in the future.”

If you read our recently published series Mastering the Art of Business Development, then you know how important it is to prioritize business development in your career. And yet, despite this knowledge, many people still don’t spend enough (or any) time on business development. One of the reasons for this is that while people know that business development is important, they don’t understand the present value of doing it. This is a challenge even for those who enjoy doing business development because at the end of the day, we all still need to get our actual work done. This article will teach you how to find the “sweet spot” where you not only get your work done, but you enhance your career and income through an optimal amount of business development.

Many people have a hard time understanding the present value of business development because they see it as a nebulous concept that may or may not help them in the future. Therefore, they choose to focus their time on things that appear more concrete (like billing hours) despite evidence to the contrary. For example, the beneficial effects of meditation are now well-known and studied. Meditating even just five minutes a day can improve productivity and reduce stress, illness and fatigue. I know a few people who take this seriously and incorporate a meditation ritual into their daily routine, but for most (myself included), we make excuses like “I don’t have time today” or “I’ll get to it later.” There’s an old Buddhist saying: “You should meditate one hour a day, but if you don’t have an hour to meditate, you should meditate two hours a day!”

In contrast, there are many other choices that produce delayed and uncertain results that we as a society routinely accept as normal. For instance, most Americans will give up working at a full-time job for four years in order to attend college because they believe that the long-term payout is worth it. Many people will also give up income in order to start their own business because they believe that in the long run the benefit will be worthwhile. Hundreds of thousands of Americans visit a gym multiple times a week to achieve both long-term health and aesthetic results despite the opportunity cost and hard work involved.

So, what is the difference between someone who is willing to go to the gym five times a week for an hour, but who won’t spend five minutes meditating even though it’s proven to make him or her more effective and healthier? Why would someone give up four years of income and work experience to attend an expensive University when that same person years later won’t give up one billable hour a week to attend a networking event or grab drinks with a business contact? The answer is that the risk of not taking those five minutes to meditate, or not going to that networking event or grabbing a drink is not immediate and there is no guarantee that it will occur. In contrast, societal standards and the long-standing cultural norms associated with going to college and the gym give us more certainty that we will make more money in the future with a college degree and that we will reduce our risk of heart attack and look more attractive if we regularly exercise.

It’s that certainty or lack thereof that this article aims to address, because it is, in fact, certain that you will gain a whole host of benefits from spending some amount of time doing business development. By attempting to calculate the present value of doing business development, you can be more certain that you are spending your time in an optimal way.

One way you might contemplate this issue is by calculating your marginal utility. In classic economics, marginal utility, or the idea of opportunity cost, is demonstrated through a model of guns vs. butter. In a theoretical economy with only two goods, a choice must be made between how much of each good to produce. As an economy produces more guns (military spending) it must reduce its production of butter (food), and vice versa.[1]

In other words, there is a “sweet spot” where you will benefit the most from working x number of hours and doing business development for y number of hours. Doing more or less business development than this sweet spot will decrease your utility.  For example, the first hour(s) of business development may help you a lot, but at some point the utility of business development starts to drastically fall and you need to switch to work mode.

Using this model as a frame of reference, take a look at your investments and returns and make some estimates. Note: the following examples are oversimplified and in reality, there are likely many other factors to consider, but they illustrate the concept. Let’s say you are an attorney at a firm. The opportunity cost for doing business development is lost billable hours. But the opportunity cost for not doing business development is that you may not be able to make partner or eventually run your own business. Let’s say that you make about $200 an hour if you outsource and do work for other lawyers. If you were billing your own clients, you’d be able to charge $400 an hour. The question then becomes, how much time will you need to spend doing business development in order to get (and keep) a client?

In one scenario, the lawyer who bills 40 hours a week at $200 an hour makes $8,000 a week. If you were able to secure clients by doing 10 hours of business development a week and billing 30 hours at a rate of $400 an hour, that would be worth it because you would end up with $12,000 a week. If, on the other hand, you are just starting out and have no experience and no network, it might take you 30 hours a week to get enough clients just to bill 10 hours a week, which means you’d only be making $4,000 a month. Perhaps in that scenario, it would be better to build your experience and network working for other people before going out on your own.

Remember, more business development doesn’t necessarily equal more new clients! I, for example, have cut down on the number of networking conferences I go to per year because I found that I did not have enough time to follow up with each contact. Without follow up, the time spent on the conference is meaningless. This is a situation in which more networking decreases utility. You may also want to consider that not all clients are equal. Some clients may pay lower rates, but take up a lot more of your business development time to acquire and keep. In that situation you’d want to focus your business development efforts on fewer clients but those that are less of a headache and pay higher rates.

Some additional questions you might want to ask yourself in order to make this calculation might be:

  • What have you invested? (Ex:  tuition)
  • What has been your opportunity cost (Ex: not having a job while in grad school)
  • How much do you currently make? For what amount of work?
  • What is your current quality of life?
  • How much does someone in a comparable position to what you see yourself in in the future make? How many hours do they work?  What is their quality of life like?

Hopefully this helps you identify your own personal sweet spot so that you can optimize your utility. Stay tuned for more business development tips from myself and other experts in the Opus Connect community.



Lou Sokolovskiy
Founder/CEO, Opus Connect

Race to the Finish Line: Proprietary Deals in Today’s Hypercompetitive Market

By Carrie DiLauro, Hamilton Robinson Capital Partners

This weekend the Indy 500 will take place at the Brickyard in Indianapolis for its 103rd year. The race has grown to become the largest single-day sporting event in the world, drawing 300,000-400,000 spectators (to put this in perspective, the largest crowd to ever watch a Super Bowl live was Super Bowl XIV in 1980, drawing 103,985 spectators). The Brickyard has been owned by the same family since the end of World War II, so you might be wondering what in the world does this have to do with proprietary deals? Proprietary deal flow is the act of identifying companies that no other investor has engaged with in the hopes of actually closing a deal with better terms and a lower purchase price multiple, achieving a significant competitive advantage. There has been a lot of talk in the private equity sector recently about the decline of proprietary deal flow. Many even believe that proprietary deals no longer exist at all.

There are several “causes of death” of the proprietary deal. The American Investment Council reports allocations to private equity increased 8% from 2017 to 2018 topping out at $331 billion, and 47% of institutional investors intend to increase their exposure to private equity again this year.  While the increase in allocations to private equity is exciting, it also means that firms need to identify companies to purchase and deploy this growing pool of capital. Higher levels of competition have made identifying inefficiencies in the system and finding a discount or off-the-beaten-path opportunity virtually impossible. Now ratchet up the competition with the explosive growth of the independent broker-dealer, which is now at an all-time high due to the reversal of the DOL’s fiduciary rule, rising interest rates and the steady growth of the stock market. The Bain Global Private Equity Report estimates for every 100 potential targets that go into the top of the funnel, it is estimated that only 1-2 will actually result in a closed deal and Sutton Place Strategies reports private equity firms are only seeing a median of 17.2% of their target market deal flow.

Additionally, increased use of technology has considerably democratized deal flow, decreasing proprietary barriers and transferring the balance of power to the business owner. LexisNexis estimated back in 2011, only 57% of private equity firms were utilizing a CRM system. Today, a CRM is table stakes for an effective deal sourcing program. As transparency increases and market forces take over, the best products will attract the best buyers at the best prices in the shortest amount of time. Private equity firms have adapted by expanding technology usage back to the due diligence phase of courtship. By applying advanced analytics, firms can develop a faster more comprehensive assessment of which assets of a potential target are essential to support growth. Analytics are used to evaluate management and operating capabilities as well as develop better probability ranges around pricing the deal. In this hyper-competitive market, private equity firms are becoming more focused on “winning” deals at an acceptable price than on where deals are sourced from. With purchasing prices approaching all-time highs (GFData headlined a near-record valuation mark of 7.8x Trailing Twelve Months (TTM) adjusted EBITDA for the fourth quarter of 2018), as well as the decreasing cost and ability to easily implement many of the data analytics programs, private equity firms are again adapting and refining their strategies to seek out competitive advantages not just in deal sourcing, but in the ability to close a deal.

So how can private equity firms differentiate themselves and improve their odds in this hypercompetitive market? One strategy is to focus more on sourcing the right deals. Quality trumps quantity, and quality deals are sourced by adding a humanizing element to the process. Firms should develop a core identity around the collective skills and expertise of the people who work there. The ability to clearly articulate the types of businesses you would like to buy and having a unique angle on that deal will set you apart from others in a competitive process. In addition, deal sourcing should become a company-wide initiative, with professionals aligning themselves across industry verticals to foster better conversations and a more in-depth understanding of the unique financial and operational attributes in that industry. The ability to identify and expand a network of intermediaries, advisers and influencers in a particular vertical and foster “contacts” into “relationships” will give a private equity firms an edge in identifying new deal opportunities and perhaps a path to that elusive unicorn, a proprietary deal.

Back to the race. Over a hundred years ago, at the very first Indy 500 race in 1911, most cars used a co-pilot to warn the driver when he was being overtaken. The winner of the race that year, Ray Harroun, outfitted his car with a rear-view mirror instead of a co-pilot. At this year’s race, thanks to new “smart racing” technology, over 50 million data records will be recorded off the cars in an average 2-hour race. Spectators will be able to monitor a driver’s heartbeat and even the muscle movement in their forearms! While advances in technology have clearly changed the way that both drivers and fans experience the Indy 500, at the end of the day the driver is still an integral component of winning the race. So too, with private equity, relationships and professional expertise, in combination with advanced technology, is the formula that firms need to win the deal.


About the author:

Carrie joined HRCP in 2009 and brings over 25 years of experience in global manufacturing and finance. She is responsible for a wide scope of operations management for the firm including investment sourcing, investor relations, marketing, IT, facilities management, human resources, compliance and accounting. Prior to HRCP, Carrie spent 15 years overseeing worldwide textile production. Carrie received a BS from Cornell University and a Master of Finance from Harvard University.

Recap: LA Deal Connect For Private Equity and Investment Bankers

Economics vs. Relationship – How the Two are Measured When Choosing a Deal Partner

On March 19, 2019 Opus Connect produced an Investment Banker Deal Connect, hosted by Buchalter in Downtown Los Angeles. Over 50 lower middle and middle market M&A senior executives attended the event, which was sponsored by Avant Advisory, Sapient Investigations, USI Insurance, Lawrence Financial Group, GemCap Solutions, First Republic Bank, and CohnReznick. Opus kicked off the day with a panel on how relationships play a significant role in today’s highly competitive market, followed by the Deal Connect portion of the event in which attendees were paired up for multiple one-on-one meetings.

The panel, entitled Economics vs. Relationship – How the Two are Measured When Choosing a Deal Partner, was moderated by Phil Schroeder, one of Buchalter’s Shareholders. Panelists included two investment banking professionals (Burke Dempsey, Managing Director of Wedbush Securities and Scott Cohen, Vice President of Metropolitan Capital) and two private equity professionals (Carrie DiLauro, Director of Operations at Hamilton Robinson Capital Partners and Larry Simon, a Partner at Clearview Capital). Mr. Schroeder asked questions relating to how relationships affect deal-flow, from getting to the negotiations table to closing the deal.

DiLauro posited that in the highly competitive private equity market of late, proprietary deals have become a thing of the past. Dempsey generally agreed, and explained how this affected the role of investment bankers who now strive to save private equity firms the trouble of chasing irrelevant deals by understanding these firms and bringing only appropriate deals to the table. Cohen, in turn, posited that coming to events such as the Deal Connect is a great way for investment bankers to learn more about the private equity firms and to understand what they are looking for.

The panelists had some interesting perspectives on how best to ensure that a transaction closes once the parties are at the table. While economics are obviously relevant to some degree, Simon shared his view that “relationships are everything.” He analogized the negotiations table to a date: “You get in the room and you are either feeling it or not. You need to feel the vibe and have a like-mindedness.” DiLauro also agreed that economics isn’t everything in a deal. She recounted an experience in which her firm was buying a family owned business run by a husband and wife, who disagreed on what they wanted out of the deal. The wife wanted to stay on and run the company, while the husband was looking to buy a marina. Ultimately, a higher bidder lost out because they were too aggressive in their approach and the couple felt more comfortable with Hamilton Robinson.

The investment bankers also agreed that the relationship aspects of a deal cannot be understated. Cohen, for example, always asks families what the legacy is they want to leave and what would they view as a success in 5 years. In his experience, there is more to these transactions than only the money. Dempsey also conferred that there is an element of trust and goodwill that goes into a successful transaction. When terms and conditions are being presented, it’s important to feel confident that the people across the table from you are knowledgeable, fair and honest.

Following the panel, participants entered into an afternoon of one-on-one meetings, carefully curated by Opus Connect to facilitate meaningful and relevant connections. Matches were mostly between capital providers and investment bankers and were based on criteria such as industry and asset classes. In addition, each individual was pre-qualified by Opus Connect prior to the event.

Upcoming Deal Connect events are taking place in San Francisco, Denver and Toronto this May. You can find more information about these events as well as many others on our website. Contact us today to sign up or to become a member.



Deal Connect: A Pre-Filled Dance Card For M&A Professionals

‘But perhaps the most important value-add that Opus Connect provides its members is a basis for relationships that result in transactions.’


Deal Connect: A Pre-Filled Dance Card For M&A Professionals

Opus Connect hosts frequent Deal Connect events in various cities throughout the country for M&A professionals. On March 19, 2019, Opus produced an Investment Banker Deal Connect, hosted by Buchalter in Downtown Los Angeles. Over 50 lower middle and middle market M&A senior executives attended the event, which was sponsored by Avant Advisory, Sapient Investigations, USI Insurance, Lawrence Financial Group, GemCap Solutions, First Republic Bank, and CohnReznick. The day began with a panel on how relationships play a significant role in today’s highly competitive market, followed by the Deal Connect portion of the event in which attendees were paired up for multiple one-on-one meetings that were carefully curated by Opus Connect to facilitate meaningful and relevant connections. Matches were mostly between capital providers and investment bankers and were based on criteria such as industry and asset classes. In addition, each individual was pre-qualified by Opus Connect prior to the event.

According to OFS Capital’s Michelle Rogers, the Deal Connect portion of the event is like getting a “pre-filled dance card” of relevant connections. For Carrie DiLauro, “usually our selection of who we are meeting with is pretty well vetted towards what we actually do and the deal we would actually partake in.” Having so many meetings in one afternoon is also an “efficient way of meeting new potential investors,” according to Isaac Palmer, Founder and Managing Partner of Qualia Legacy Advisors. Qualia is a boutique investment bank based in Los Angeles that focuses exclusively on entertainment and media. For Palmer, Deal Connect is a great way of getting on people’s radars who are specifically interested in these industries.

“The unique regional nature of these events” is also attractive to participants, according to Jeff Parent, Vice President of Insight Equity, a middle market majority equity buyout firm based outside of Dallas, Texas. It “enables us to meet people we wouldn’t ordinarily be able to meet.” For Michael Grenier, who was attending his first Deal Connect, the draw was to network and meet relevant contacts face-to-face. Grenier, the sole member of Ballard Canyon Capital, lower middle market- focused investment bank based in Santa Barbara, CA, spoke of the importance of face-to-face meetings like those at a Deal Connect which foster a level of comfort and trust, an invaluable aspect of a transaction.

Attending a Deal Connect is also a great marketing opportunity. For Britt Terrell of Backbone Capital, a capital raising advisor in the lower middle market, a huge value-add from attending Deal Connect events has been the ability to speak on or lead panels. Terrell believes that these opportunities have helped build his brand and increase his firm’s exposure. This could prove especially useful for newer or up-and-coming firms, such as G2 Capital Advisors, a boutique investment bank and restructuring firm. Ben Wright, G2’s COO claimed that Deal Connect events have helped him “get our name out” as well as provided “great marketing and opportunities to go to new geographies.”

But perhaps the most important value-add that Opus Connect provides its members is a basis for relationships that result in transactions. Ben Wright shared that “there is one firm attending today that is currently bidding on one of our assets.” Wright had met this firm at three previous Opus Connect events and was “hopeful that this will lead to a closed deal.” Indeed, several attendees described their successes due to Opus Connect events. Stefan Okhuysen, a Principal at CVF Capital Partners, a lower middle market mezzanine financing and private equity group based in CA said that he’s seen a number of deals come out of Opus Connect events. Okhuysen shared that he was attending this Deal Connect because his firm currently has a $200 million fund that it needs to deploy and was hopeful that the event would help them do that.

On the investment banking side, Cary Hurwitz of West Cape Advisors mentioned a deal that he closed through Opus Connect. Several years ago at another Opus event, he showed Michelle Rogers of OFS Capital a transaction in the transportation logistics space. Rogers referred an asset-based lender for the deal that turned out to be the perfect fit for the company. She introduced Hurwitz to three other people and one of those connections led to a closed deal.

One of the challenges of having such a full dance card is how participants can still stand out and be memorable. We asked some of the participants how they use their “personal brand” to differentiate themselves at Deal Connect events so that they create memorable, lasting relationships. AJ Somers of Arrowmark Partners starts by trying to figure out who he is talking to first, so that her can target it the conversation in a way that it will resonate. “I usually start out by asking people, what would make this day successful for you? I’ll try to figure out what they are actually after, and then I can talk to it.” Michelle Rogers uses a more “personal touch,” asking questions such as where the person went to school or whether they have kids so that when she sends a follow up she can speak to more than just the professional overlap.

Upcoming Deal Connect events are taking place in San Francisco, Denver and Toronto this May. You can find more information about these events as well as many others on our website. Contact us today to sign up or to become a member.

Revenue Recognition for Private Equity

The Pine Hill Group
Opus Connect NYC Private Equity Chapter Sponsor


Revenue Recognition for Private Equity
How an accounting standard can impact your deal

The new accounting standard for revenue recognition (ASC 606), which goes into effect early next year for privately held companies is just an accounting change, right? Not at all. It could prompt private equity firms to adjust the way they project the growth of portfolio companies and revise the way they market those companies for sale. The goal of the standard is to create a comprehensive revenue recognition model that is agnostic to all industries and capital markets and increases comparability of companies’ financial statements. To do so, it ties the recognition of revenue more closely to when control of a product or service is transferred to a customer. Depending on the type of company, that could mean big changes to key financial metrics and ratios, including EBITDA, and could impact the financials in ways that could have an impact on debt covenant compliance, taxes, mergers and acquisition activity, and other exit strategies such as IPOs.

You may feel an impact whether buying or selling

On the buy side, it’s important that private equity (PE) firms understand the standard well enough to evaluate the impacts during their due diligence. If a target hasn’t yet implemented the standard, the PE firm needs to understand what the financials will look like in the future once the new rules become effective for all companies.

On the sell side, PE firms need to make sure their portfolio companies have implemented the new standard or be able to provide an explanation of why they have not and their action plan to do so in due course. This is especially important if the potential buyer is a public company that has already complied with the new standard.

The new standard offers two transition options – modified or full retrospective. Under full retrospective, an entity can choose to apply the new standard to all its contracts – and retrospectively adjust each comparative period presented in its 2017-2018 financial statements if it waits until the mandatory effective date.

Under the modified approach, an entity can recognize the cumulative effect of applying the new standard at the date of initial application – and make no adjustments to its comparative information. However, the company will need to report under both legacy and new accounting rules during the year of adoption.

The choice of transition option can have a significant effect on revenue trends. For example, if a company elects modified retrospective, i.e., cumulative catch-up, it may not be appropriate for a sponsor to look at trends from 2017 – 2019 because the periods will be presented on different accounting bases. Buyers may discount the offer price because of the lack of comparability. Therefore, to maximize value, private companies that may be involved in potential sale-side transactions might want to strongly consider adopting ASC 606 on a retrospective basis.

Take a SAAS company that has $9 million in revenue over a period of years, and the contract has two deliverables/obligations that are distinct from each other. Under the standard, depending on the obligations outlined in the contract, some of the revenue may now be recognized upfront, and some revenue may be recognized over time. The result is that revenue will temporarily increase, creating a temporary blip in profitability or EBITDA.

Or consider a pharmaceutical company that currently recognizes revenue only when their distributor sells to the end customer. Under the new standard, the company may be able to recognize revenue earlier based on when “control” has transferred, or when the product is provided to the distributor. Further, certain contract-related costs like sales commissions, which were previously expenses when incurred, may now have to be capitalized and amortized over the life of the contract, which would increase EBITDA in certain periods.

Under legacy GAAP, some companies didn’t expressly disclose their unbilled receivables – a very risky account which represents revenue recognized, but which can’t currently be billed to customers under the terms of the contract. Under ASC 606, unbilled revenues are now captured as part of a “contract asset” account, the balances of which need to be clearly disclosed in the financials. Prospective buyers should scrutinize this account during their due diligence process as it carries significant risk if the target’s estimates of contract profitability, or the customer’s ability/intent to pay, turn out to be different than initial expectations.

The bottom line is that even if a company’s total revenue doesn’t change, the “timing” of when the revenue is will likely change which may have an impact on key metrics during the acquisition and divestiture processes. Private equity firms should understand how to tell the story as to why revenue year over year is different even if the overall profitability is the same.

The value creation story may change

When a company implements the new standard, private equity owners may need to rewrite the value creation story they tell potential buyers. PE firms use financial modeling to identify and project revenue streams, then devise a strategy for improving those numbers with the goal of exiting the investment in a set number of years. These growth projections are the heart of their story.

Under the new rules, the whole model may be impacted as a result of the revenue numbers reported in your financial statements changing. It will make it harder to tell your story to attract buyers even if nothing actually changes in the performance of the company. You need to be smart about how you tell the story and how the financial statements reflect that story. Given the complexities of ASC 606, implementation will require a carefully planned methodology and an experienced project management team. Unlike some previous standards, ASC 606 requires significant effort, knowledge, and judgment to ensure that disclosures in the financial statement are accurate, complete, and timely. The new guidelines also add significant new disclosure requirements that may vary across different companies based on their operations. It will be very difficult to use boilerplate disclosures to satisfy the requirements in ASC 606. Most businesses will need to seek outside advisors since in-house ASC 606 expertise is few and far between.

Time is running out

As the effective date of ASC 606 is imminent, implementing ASC 606 should be a high priority for portfolio companies. If an acquisition is in your future, you may have to modify or normalize the information you receive from the target company (seller) to compare apples to apples to get a good sense of the impact on key metrics, ratios, EBITDA.

To have a further discussion regarding the revenue recognition standard, please contact:

Dan Rudio
Managing Director

William Andreoni
Senior Director

© 2018 Pine Hill Group llc. This document is for general information purposes only, and should not be used as a substitute for
consultation with professional advisors.