during challenging times. I also would like to thank my sister Julia, my parents and grandparents for instilling me with a strong work ethic and teaching me the importance of critical thinking.
I am fortunate to have an extraordinary group of friends, many of whom encouraged me to write this book and provided constructive comments on my manuscript: thank you, Stefan Loesch, Oksana Denysenko, Helena Clavel-Flores, Irina Grigorenko, Vittoria Stefanello, Leopoldo Carbone, Julia Shur and Oksana Tiedt. In addition, I am grateful to Lee Barbour for delivering first-class editing support, and to Emma Stefanello and Michael Majdalani for providing excellent research assistance.
I would like to express my gratitude to Eli Talmor, Dirk Donath, Giampiero Mazza, Joshua Rosenbaum, Joshua Pearl, Alex Emery and Ted Berk. Each of these highly accomplished individuals were kind enough to read my book and provide me with their personal endorsement.
A special thanks to everyone in the Wiley team who assisted me in making this book a reality: my acquisitions editor, Bill Falloon, my assistant acquisitions editor, Samantha Enders, my managing editor, Purvi Patel, and my Editorial Assistant, Samantha Wu.
Finally, I would like to say thank you to a long list of brilliant work colleagues who taught me everything I know about private equity and dedicated their time to developing my investment acumen early in my career. I can't name you all, but you probably remember the long hours we worked together and know who you are, folks. Thank you!
About the Author
Tamara Sakovska is a private equity investor, board director and the founder of Lavra Group. She has over two decades of finance and investment experience gained at Goldman Sachs, HarbourVest Partners, Warburg Pincus, Permira, Eton Park and Global Family Partners.
Tamara's investment experience includes originating, leading and executing leveraged buyouts, minority and control growth equity transactions as well as private investments in publicly listed companies. She has also invested in private equity funds-of-funds and structured strategic co-investment partnerships with institutional investors, corporations and ultra-high-net-worth family groups. During her investment career, she has gained in-depth, global transaction experience across 14 countries in the technology, telecommunications, energy, natural resources, real estate and consumer sectors, among others.
Tamara is a tenured board member with a strong track record of managing complex strategic and corporate governance issues in both publicly listed and private companies. She has extensive corporate governance expertise, holds a Diploma with Distinction in Company Direction, is a Chartered Director and a Fellow of the Institute of Directors (UK). In 2018, Tamara received the Director of the Year Award in the Chartered Director category. She currently serves as an Independent Director and Chair of the Nominating Committee on the boards of two public companies listed on the London Stock Exchange and the Nasdaq, respectively.
Tamara holds an MBA with Distinction from London Business School (UK) and a BA with Honors and Distinction in Economics and Art History from Stanford University (USA), where she graduated Phi Beta Kappa and received the Anna Laura Myers Prize in Economics.
1 First Thoughts on Deal Sourcing
Key Topics in Chapter 1:
Why deal sourcing remains an obscure field
Six action steps to take today to enhance your deal origination prowess
Proven deal sourcing strategies and the search for the mythical proprietary deal
How to assess your current deal sourcing capabilities
Key trends to look for now to spot future private equity deals ahead of others
Introduction to Deal Sourcing
Private equity begins with finding a suitable investment opportunity. Preferably, a great one. The first three chapters of this book discuss exactly that—the process of finding a private equity deal that represents a perfect fit for your investment mandate. In my personal experience, I have found this to be a tedious and frustrating process. Why? The private equity industry has been operating for nearly half a century, yet there is no one source that educates others in a granular and systematic way about how to build a solid private equity origination capability. Therefore, I set out to put my own detailed thoughts and experience in writing in order to share my perspective with others about this complicated process. My aim is to be as thorough as possible so that, after reading these first three chapters, you will walk away with a couple of solid and useful frameworks that will positively transform your deal sourcing outcomes.
Let's begin.
Why is understanding deal sourcing important? There are two primary reasons. First, creating and sustaining a flow of high-quality deal ideas is one of the core competencies of a successful private equity professional. This competency resonates very closely with the perceived brand of every private equity fund and, eventually, with your personal brand. Every limited partner (“LP”) investing in private equity funds is looking to identify a team of rainmakers who can demonstrate that they are capable of developing differentiated investment themes, finding sustainable sources of deal flow and closing successful transactions. As you get more experienced in private equity, the people you report to will increasingly expect you to originate your own deals proactively.
The second reason is that deal sourcing—while being critical to investment success—remains remarkably obscure. There is extremely little written specifically about private equity deal sourcing and how to master it. The books on private equity that I have researched seem to include only a high-level discussion of this topic. If you are interested in private equity, chances are you regularly come across articles in the trade press discussing the challenges of finding a good deal. If you have attended private equity conferences, as I have, then you've also heard a good number of deal origination war stories. However, I wasn't able to find a single resource that sets out a detailed private equity deal origination framework in one place. Hence, I believe I can make a contribution to this area with my deal sourcing guide.
In my research, I was able to identify only one study, conducted by Teten and Farmer (2010), analyzing deal sourcing strategies across the private equity industry and outlining a number of actionable steps aimed at improving the deal origination process. Unfortunately, I could not use the valuable lessons of this study in my own career because this research was published many years after I had been tasked with originating my own private equity transactions. In the study, the authors reaffirm the importance of deal sourcing in private equity: it turns out that late-stage venture capital and growth equity investors with proactive origination programs are almost all top-quartile performers across stage, vintage and sector. This makes sense. You can now understand why LPs might be very interested in examining your firm's deal sourcing process in agonizing detail.
When I started my first private equity job at a firm focused on large leveraged buyouts (“LBOs”), I found the process of deal origination and initial review fairly exciting. It was great to think through numerous business models and admire new ideas. However, it was also extremely exasperating. I was a member of the consumer team and it was not unusual for us to analyze over 100 large buyouts a year, bring 10–12 deals to the investment committee and work on three or four full deal execution processes in order to close just one transaction that year.
Yes, you read that correctly: the goal of my team was to review over 100 potential deals in order to close one deal per year. If you are lucky enough to complete one transaction a year, you are right on track! Sometimes, even this modest goal was out of reach. For
