Getting access to brokered deals

July 15, 2022

by a searcher from Northwestern University - Kellogg School of Management in Nashville, TN, USA

I’m a self-funded searcher leveraging brokered and proprietary outreach but I’m having trouble getting access to CIMs and getting in front of sellers via brokers. I’m assuming it’s due to my personal balance sheet. I’m looking at $750K+ EBITDA deals and have personal capital to deploy, but not enough to fund 10% of a $2.5M+ acquisition. I’m planning to raise gap capital from investors to fund my acquisition but I don’t have gap capital formally lined up.
Has anyone experienced this issue before and have any advice? Do I need to have capital formally lined up before getting access to brokered deals? I just started searching and any advice would be greatly appreciated!

I’m searching out of Nashville and planning to buy in Middle Tennessee. Feel free to email me directly at redacted or reach out on LinkedIn or Twitter redacted

Reply by an intermediary
from Wake Forest University in Winston-Salem, NC, USA

^redacted‌ - good question, and likely the reason you state. While perhaps not having it formally lined up, you could move in between that and needing to go get it once you get into the transaction. The latter is obviously more risky for the broker and their client, and if it is at all a competitive situation, is probably not going to get you invited to the table. To do this, can you get a letter from one of your key or lead investors describing their commitment? In other words, how can you separate yourself from those who may not even have it informally lined up, and how can you demonstrate that you will be able to bring the necessary equity injection to the to closing.

Also, recommend checking out this post: https://www.searchfunder.com/post/sorry-but-you-are-a-brokers-worst-nightmare-and-how-to-fix-it

Reply by a searcher
from State University of New York (SUNY) in Buffalo, NY, USA

I agree with Ron here. The broker doesn’t want to waste their time on a buyer that may not be able to close due to a lack of capital. Coming to the table with a commitment letter from one or two outside investors (ideally not friends or family) should help get the broker comfortable.

I’m not sure what your background is, but they may also be concerned about how much M&A experience you have. If you don’t come from a deal background, hopefully you can point to a close advisor who can guide you through the acquisition process. Make it clear you know who your lawyer, QoE provider, other diligence providers will be so you can run an efficient process to close.

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