Has anyone used River Guides for deal flow?
August 20, 2021
by a searcher in New York, NY, USA
Has anyone utilized River Guides / Industry Consultants for warm introductions / deal flow? Would be interested to know if they proved successful in providing intros to potential targets. Intuitively, I am under the impression that this might be a worthwhile investment to increase hit/response rate.
from University of Minnesota in Minneapolis, MN, USA
A) I was under the impression that a River Guide is anyone experienced in M&A that helps guide a buyer (and/or a seller) through the deal process once the introduction has already been made. In this context, the "River" is the deal itself, and the Guide isn't finding the river, she's helping navigate it as a consultant. This seems to makes a lot of sense in the Main Street/LMM context if there is no helpful broker involved, considering other professional advisors are expensive and bill by the hour, and presumably most owners (and Buyers) may not be particularly familiar with the M&A process.
B) On the other hand, it appears that a more typical definition would be a business advisor (lawyer, accountant, coach, pretty much any non-broker) that makes introductions and then may or may not provide paid transactional advice on any deal that subsequently follows. In this context, the "River" is the deal marketplace, and the "Guide" is helping the Buyer navigate to a target business.
Regardless of whether we're using A or B (or both...?), I don't see how it can hurt touching base with as many of these people as possible in a reasonably efficient manner in order to unearth potential opportunities. I know plenty of advisors that would be thrilled to save their clients a broker commission, have a warm intro to a successor business (and future client), and possibly make a few bucks on top of it. Plus it's never a bad thing to have deal professionals in your network, right? Good luck!!
from Texas A&M University in Elizabethton, TN, USA
I don't do cold emails or mass mailing. Be prepared to follow-up seriously and quickly when Guide makes an intro.
Guide can also help when things go off the rails (no broker involved to mediate).
For compensation, my thought is a gentleman's agreement of $10k cash at close, if you close on an intro within 2 years of introduction. Needs to be someone/something you were not previously aware of, and expectations on fee must be written before an intro. I would gladly pay such a fee on any sized deal. Some will do this for no fee, just want to help the local community and young entrepreneurs.