Deal Sourcing 201 How to Become the Buyer of Choice in ETA

An MBA from Stanford GSB, also hosts a podcast, Masters in Small Business M&A, which many of you have heard. So once again, please welcome to the stage to support SMBash, Peter Lerman.

Thanks a lot, Kevin. Hey, guys and gals. Great to have you. I was lucky enough to get my slides up here. I don't know how I got the royal treatment. Maybe I used PowerPoint and she used Google Slides. So every once in a while, the old school software prevails.

You're going to get a bit of a flogging of deal sourcing tips and tricks between the prior hour and this hour. I was sitting right here, so I got to hear a lot of what Athena had to share, and I think she did an excellent job. I will maybe move through certain slides faster because there may be a certain amount of overlap. I think I have a pretty good 201 curriculum here for you, and I think she did an excellent job at 101 and maybe a little bit more than 101.

The way that I titled this presentation, Deal Sourcing 201, the byline underneath it is to help the ETA community understand this concept of buyer of choice, and becoming the buyer of choice. I'm going to get into that, and then I'm going to spend the rest of the time talking about what I think are some frameworks and some techniques, and then some data that I think help you move towards being a buyer of choice.

Before I get started on the buyer of choice techniques and data, I wanted to try and draw a contrast between 101 and 201, what it means to be in the hunt, what it means to be finding opportunities, sourcing opportunities, and how that progresses over your time as an operator of businesses, an acquirer of businesses, an investment professional. 101, as Athena covered with a lot of good clarity and thoroughness, is about finding opportunities, building strong, repeatable methods to find opportunities that are interesting to you, that could potentially be compelling acquisitions, opportunities for you to go in as an operator. In some cases, you may find that you're not going to be an operator for the whole time. You may buy the business, go in as interim CEO, and then decide that it's better for somebody else to run the business, and you want to continue to be focused on acquisitions. So 101 is about finding deals.

201 is about finding the deals that you want to find, being invited to those opportunities by the sell side, particularly by the sell side investment banking or business brokerage community. And then not just being invited, but being in a position to win when you want to win. Unfortunately, you have to do all those things in order to buy a business. You have to ultimately be the buyer of choice in whatever transaction you ultimately consummate. So the question is, in what circumstances is that happening to you, and how can you earn your way into more and more of the most interesting opportunities like that?

That is what the big league game looks like, too, in private equity. It's not like they get to play a different game. They're fighting very hard to be a buyer of choice in the categories that matter a lot to them.

This is a chart that shows how small the number of intermediaries are who do a lot of deals. This is a classic power law. What it shows is that there's a very small number of M&A firms in the American lower middle market who do a lot of deals every year. And there is a huge number of organizations that do a very small number of deals. That creates a real origination problem for you as a buyer. That is vastly different from up-market M&A. That is not the Goldman Sachs game. That's not the Morgan Stanley game. They control double-digit market share in the upper middle market and in the bulge bracket market. If you're a buyer in that market, you spend time getting to know 10, 20, 30 investment bankers, and you spend a lot of time with them, and you heli-ski with them, and you go to Augusta with them, and you pay really big fees, and you don't have the same coverage problem. You have other problems, but you don't have a coverage problem. In the lower middle market, you have a real coverage problem, just because the tail is so long.

This is not a cartoon chart. This is actually data from the Axial platform. There are deals and firms in each one of these bars. This shows some data on the other side of the table. This is Axial platform data and Axial CRM data, and we merged the two for the purposes of this chart. We at Axial have prospects in our CRM database. We don't, unfortunately, have the ability to serve everybody we want to serve. So we have a CRM database, and there's a subset of that CRM database that have become customers of Axial on the buy side. We merged those for the purposes of calculating this.

What we have in the way of data at Axial between the customer base that we serve, buying businesses, and the CRM of buyers whom we want to serve, is roughly 10,000 nameable, identifiable acquirers active in the lower middle market. That's private equity, family offices doing direct deals, independent sponsors, the ETA community that we already serve, corporate buyers, portfolio companies making add-ons. That's the broad list. The reason that I call that out is there's a lot of people hunting in this pond alongside you. There's always this narrative that lower middle market is inefficient and it's not that hard. There are many people working very hard to find opportunities here. The long tail on the sell side plus the long tail on the buy side means that if you want to become a buyer of choice, you cannot be a broad generalist. It's just very hard to do it. You have to go narrow.

Unfortunately, Sam Rosati is not here. This was going to be his big moment. I did an AI query here, and good M&A advisors are hopefully using Axial for buyer sourcing, but they're going to be using lots of tools. If you were an M&A advisor selling a fencing business and you punch that into Claude or ChatGPT, Perimeter Solutions Group is the first result. That is one way to think about buyer of choice positioning. You are in a broad, general, horizontal AI technology application, and whoever you are, you somehow were able to earn position A1 on the grid. I will go through how I think Sam got to this place. He was not here when he was a first-time ETA searcher. It's a progression. It's a journey. That's why it's 201 and not 101.

To cut to the chase on Sam and the fencing business that he formed and built and now has partnered with Bertram on, he accumulated these four things in various quantities over the course of time. He developed a track record. When he was buying the first fencing business in Tampa, he was not some renowned fencing entrepreneur. That was day one. But he accumulated that over time. Then he accumulated operating experience. He began to meet other CEOs in the category. He began to meet other brokers in the category. As he developed the business, he had the capacity to borrow. He had equity partners interested in backing him more deeply. These things accumulate over time, and if you can translate that accumulation of reputation and capital into your online narrative, then it really starts working. You don't want to achieve the top three and then forget to distribute that on the internet, because everyone is starting their search on the internet in one way or another, whether they're searching in PitchBook, searching in Axial, searching on ChatGPT. The hunt on the sell side for the right buyer starts with an internet connection.

This is one framework for thinking about how you become a discoverable buyer of choice over time. Three things. You need an online narrative that precedes you. When I say precedes you, you're not going to get the chance to talk to the business owner to deliver your narrative on who you are unless you have persuaded a broker or an investment banker, or you've been persuasive in email. You have to have a narrative that's in front of the in-person meeting or the phone call or the Zoom call that you're going to have. The narrative must precede you. You must think like a marketer and use the online medium to your advantage. Two, you must build credibility that you grow over time. Three, you need to become really good with messaging that creates winning outcomes. The less credibility you have, the less capital you have, the fewer portfolio companies you have, the fewer businesses you've bought, the more you need to be great at messaging. You need to be a very persuasive salesperson in many ways when you don't have a huge trophy case of bought businesses behind you that you can show off.

When it comes to online narrative, I just encourage you to get narrow. I know that the narrative in ETA is recurring revenue, fragmented markets, low customer concentration, industry agnostic. I question that. I think that's hard. I think you can do it, and there will be people around you who do it and pull it off. I think it's hard for brokers to remember you in that context. It's hard for you to accumulate expertise in a particular category. You don't really have a compounding flywheel if you have these traits of businesses that you care about but you're industry agnostic. I take a contrarian position there and say, see if you can get narrow. It doesn't have to be an industry. You could be all in on Texas or all in on South Florida, or you could be all in on roll-ups in the pet category. Getting narrow helps. It helps focus you, and it helps you figure out how to build an audience around yourself and build narrative.

Bill is further along in this journey now, but you go to his LinkedIn page, super clear. This guy's acquiring pet brands. That's what he does. He's been doing it for a really long time. Quick fun fact. When we deliver a recommended buyer list to the sell side inside the Axial software platform, the number one most clicked link when they start looking at the buyers who we've recommended is their LinkedIn profile. They almost always go from the list of recommended buyers on Axial out to the LinkedIn profile, and then they come back to Axial and decide whether they want to move forward with you. LinkedIn really matters. It's not a job site if you're in ETA, it's a deal sourcing site.

On the left side is Marc Rowan. He started Apollo a really long time ago. It's really hard to be a generalist and talk about your investment interests broadly defined unless you have a lot of weight behind you and a lot of transaction history. They can go on CNBC and talk about what kind of capital does America need to grow in the next generation. They can have that broad conversation. They can accumulate an audience around that. Apollo, Blackstone, they can become top of mind in those settings. Much harder in the lower middle market for someone getting started or maybe on transaction number two in ETA. I contrast that with Kyle Tucker, who's an Axial customer who I've gotten to know a little bit, and I had him on the podcast. He left Apollo and started an investment firm called Tucker's Farm. This is an interesting business that he bought in the pizza category. On the one hand, CNBC, investing, private equity, what is Apollo doing? On the right side, pizza. Kyle and pizza. If I'm working on a pizza business, Kyle. It's easy to remember, and that's the sharpness that you want to tilt in your favor.

Those of you who are operators with good operating backgrounds, and maybe with a little bit of sales and marketing chops, have probably come across the content marketing strategy in B2B sales, B2B services. If you're an operating company, you maybe have a blog. You write articles. You publish interesting findings on your website. The categorical leader in this conceptual marketing category was HubSpot. It's become a very successful business. It's this whole idea of creating content on the internet, having that content be original, high quality, and be a magnet for leads as opposed to you having to go outbound for all of your leads. There are many firms who have now done this, but Brent and his team at Permanent Equity are probably still in the kingmaking position when it comes to content creation. It's not an accident that it's a bunch of University of Missouri grads, which has got the number one journalism school in America. They're great writers. They love the pen. They know how to wield the power of the pen. Brent and the team at Permanent Equity have an enormous inbound deal sourcing advantage because of that.

Do you need to create a huge library of content and just sit there in your basement and write articles all day long? I'm not suggesting that, but once you've gotten narrow and you're like Bill D'Alessandro and you're buying pet brands, if you can get narrow and then start thinking about what is the content funnel that you can begin to create, it starts to get more clear. If you're a generalist, what are you going to write about? What blog can you write? What LinkedIn post can you write that's pithy? The combination of getting narrow and then getting serious about content creation is interesting. The tools to create content, it's really intellectual property. It's not that expensive anymore. You don't need a video studio. I created a podcast for Axial two years ago. I do it from my home computer. I don't go to a studio in New York City. Producing content is really more about just finding the time to do it, deciding it's something that's interesting and important to you. It's not expensive. It's not something that only the big private equity funds with lots of money can do. You just do the work. It's actually not that hard.

Ben Tegeler, this is a Texan in Austin. He bought an MSP. He's been running it as the operator, and I didn't verify this with him, but I bet you that 90% of the reason why he's created The MSP Owner Podcast is not because he likes to just for goodness' sake interview other MSP owners. He wants to network in his category, wants to build relationships with other owners because once he has his sea legs underneath him running the business that he bought, he's going to want to be acquisitive. He's going to want to have a built-in pipeline of owners who he knows, who are in his category, who he's interviewed on his podcast. If you want to do a podcast once or twice every month, it takes two, three hours of time. It's really not that bad.

This is a quick summary on the Axial platform of who is closing transactions and how did we rank their general online narrative. About 80% have either a great or a good online narrative. On this slide here, I give you a rubric of what great-ish looks like, what good-ish looks like, and what poor looks like. If you're going to be in the poor category, you better be a really major heavyweight. Then you can pull it off. Then it has almost like allure and sort of mysterious appeal because if you're Apollo and you barely have a website, everybody is intrigued by that. But if you're not Apollo, you don't want to be poor.

Pillar number two, credibility that you can grow over time. This is an amazing corporate development professional. She was in the pest category and the Servpro disaster site recovery services category as a corporate development professional. Went out on her own and started a business called Daisy, which is a smart home automation business. Think about everything related to turning your home into Nest and Lutron, turning on your speakers, turning your lights off. She's done a fantastic job of memorializing every single acquisition that she's made, including the launch of the business. Before you've made an acquisition, you might be asking yourself, what can I make a press release about? You can make a press release about the launch of your search. It's just one of those moments when you have to get past your humility, you have to get past the hesitation. Begin to ask yourself, what is the press release that I could write about the search that I'm running?

I don't know if you guys know the Jeff Bezos advice, but whenever they were thinking about creating new products at Amazon, they said, let's write the press release that we want to write about how this product will be when we're launching this product. What's the press release going to say about this product? Then they would work backwards from that. If you were forced to write a press release about yourself, what would you have in it? What choices would you have to make? Would you choose an industry? Would you choose a region? Would you choose a category? How are you going to make it interesting? It's a good forcing function for you to think about how are you going to confine your search so that you're not just another ETA searcher looking for B2B fragmented businesses.

Back to Sam and this idea of reputation and credibility building up over time. When I started Axial in 2009, there was no one on Twitter, there was no one on LinkedIn. There were people on LinkedIn, but there was no sense of online community. SMBash didn't exist. There was just no dialogue around small business M&A. Today, it's a much richer category. There are interesting podcasts. Axial ranks and benchmarks top investment banks. We rank and benchmark top 50 firms. There are books that have been written on it. There's a local entrepreneur turned investment banker here in Dallas. His name is Lane Carrick. He's just published a fantastic book. It's alive and well. Like Athena was saying, it's the hot new thing right now. There's much more dialogue that you can participate in, and there are ways that you can accumulate online credibility by getting involved in things, whether it's meetups, events, podcasts, and then creating your own content.

This is a screenshot of a completely free page that Axial hosts for all of our ETA clients. We site optimize this. This is a public page, so we get a lot of site traffic to this. There are versions of this with Axial, versions with PitchBook, versions with other providers of information to the category. The more places that you register, the more discoverable you become. Let us at Axial and others market for you. We do this for free. This is not part of some paid profile.

This is where I wanted to try and get into some data that's a little harder for some of you to appreciate, particularly if you've been only doing off-market sourcing, or only doing on-market sourcing from the bulletin board businesses, like a BizBuySell. This data is only Axial data. The category on the left, send rate category, is showing the percent of businesses being taken to market by a broker or a banker on Axial, and the degree to which they're sending the deal to everyone whom we recommend. Only 35% of the transactions that are sent on Axial by a broker or a banker are sent to 100% of the recommended matched buyer list. The rest, they're endeavoring in a search and selection process, and they're disqualifying people. They're getting rid of people who they don't think are a buyer of choice and who is going to waste their time. There are a lot of opportunities on Axial that are totally private, and if you're not invited to them, you never see the deal. It's not a bulletin board in that way.

What's really interesting is in a lot of those cases where the deal becomes private, the broker says, I want to make it private, and I'm going to select who I think are the best buyers, but I will permit people who I didn't choose to inquire. If their inquiry is compelling, I can admit them to the process. They're leaving a crack in the door for you to get into the more challenging processes. This shows the results of people who are inquiring through that crack in the door, and the percentage of acceptances through that crack in the door. It's way higher. When we built this feature to allow the sell side to say, this is my first list, this is my most likely list, but then I'm going to let others come in and take them case by case, we never thought we would see an acceptance rate on inquiries this high. For those of you who've been around this block a little bit, this acceptance rate makes sense. This is an expression of the pecking order of how the sell side thinks about who they want to bring into their processes. A family office is a form of permanent capital. That's a compelling story for a broker to tell to their client. A strategic acquirer, compelling story. You can see how the acceptance rates on the inquiries are highest for the types of buyers that are on a consensus basis the most interesting.

What's very interesting is that even if you are in the search category, you don't have a history of closing transactions, you don't necessarily have committed capital, you're going to be borrowing a huge amount of money and PG-ing it in order to get a deal done, you're still being admitted into almost half of the opportunities that you endeavor to get into. That's really good news, on a raw database basis. It's statistical. It's thousands of numbers. This is not small numbers.

I want to get into messaging, and this is pillar number three in my framework. I want to get into messaging not on Axial, just in general, because I want messaging to be something that's not an advertisement for Axial so much as it is a way of thinking about how to persuade owners and their advisors and getting their attention.

PSG is a private equity firm in Boston, and they ostensibly were interested in Axial and buying Axial. I got a note from Cam, and this is not spam. This is not some blast email sequence in Outreach. This is either heavily customized to every owner that he's reaching out to with a little bit of automation, or this is pretty handmade. Generally speaking, buyers of choice behave more like this than at the other end of the spectrum. PSG does not send 30,000 emails out every week or every month. They just don't do it. They have a point of view on the kinds of businesses that they want to buy. They have areas of focus. They develop a perspective on those businesses. They winnow those lists down, and then they begin reaching out, or they try and meet them at conferences. That doesn't scale as well, and if you're a broad industry generalist, it's really hard to know who you are going to write your handmade email to, which is why it's so important to figure out how to get narrow, because it makes your list shorter, and then you can start to do stuff like this. When you write notes like this in narrow sectors where you're focused, I think you'll get great results. You'll get high open rates, high response rates. As you trend towards the opposite end of the spectrum and you buy lists from Grata, then load them into Outreach, and then push the cannon button, all of a sudden your performance is going to go down. You'll get some bites, but just be aware of where you are on that trend line and the message that you're sending.

This is what I think is the opposite end. This is somebody reaching out to me saying, we're interested in purchasing you. Have you considered selling? Look forward to hearing back. There's nothing interesting about this to me, and it's kind of like an instant dismiss. Another example: We have relationships with investor groups who are actively looking to invest in life science companies like Axial. Axial is not a life sciences company. He's instantly self-disqualifying himself. No owner whose business you want to buy is going to be excited about that. Maybe a bad owner, maybe an owner whose business is not particularly good. Someone who's worked their a*s off to build a good business is not going to be compelled by this. The one thing that I want to correct is the headline. Sloppy outbound is not the path to buyer of choice.

These are the themes. When I showed you the 40% up to 60% for family offices, it kind of drops into these five or six categories of theme. Authentic personal messaging, relevant sector fit, deal-specific dialogue, institutional credibility, portfolio synergy. Your messaging can build around those five. There are others, too, but those are five that we saw come up again and again in the 8,600. We crunched the numbers to see, out of the 9,000 inquiries, how many were generic-y, and how many had this more customized presentation and effort, and then tried to calculate the lift. It's like 25%, 20% lift, plus or minus. A little tricky, some judgment calls we made here, but it's worth your while. You're getting a return. You're not trying to buy hundreds and hundreds of businesses. You want good messages. It only takes one great message to kick off the right conversation for you. It's worth being customized when you can.

This slide here goes through the more that you have no experience, or you don't have a portfolio company, the more the messaging matters. The better a salesperson you have to be, because you have less to rely on. Messaging is actually very important if you are in ETA and getting out of the blocks. Ironically, it's less important if you've bought 100 businesses. When you need it the most is when you've got to be the best at it.

This is an independent sponsor survey. We have a lot of independent sponsors who are clients of Axial. We surveyed 83 of them in 2025, and this is the way that they approach messaging. I have a link here at the bottom to all of the results.

I'll show you two SMB ETA buyers who broke through. It's pretty cool. Ex-Bain consultant, no transaction background, not a banker, didn't work in PE. He originated this transaction on Axial, Holden International. He outmaneuvered 17 other buyers who were interested in pursuing the opportunity. There were eight search funds, five individual investors, three independent sponsors, one family office, and one holding company. This is from his winning LOI. He named the founders, and then in paragraph two: Even your competitors respect you, often walking into your trade show booth to admire your products and greet you personally. When the owners got this bid, it was not a generic bid. This was someone who had gone to the trade shows, gone into the booths, touched the products, and they were like, this guy's real. Hasn't done a deal before, not some luminary in the category, but he's real. I can tell that he's real. I can feel it in the messaging. I can see that he's done the work, and it matters.

Griffin Schultz, another example of this. Hugely competitive environment for a searcher to win in. Lower right corner, up against nine family offices, 11 holding companies, 16 individual private investors, 18 PE funds, 40 independent sponsors, and he won. They're not winning by bidding a ton. You obviously have to be competitive with your bid, but they're winning typically through messaging. They're winning through connectivity with the founder, and in this case, just very good mapping of his LOI to the story of this business. They just did a really nice job there. Don't take a template LOI and send it. Don't do that. Particularly now. We just ran a product management interview process at Axial, and we had this case study where we wanted them to analyze this data, and we had 100 people submit, and 99 of them had the AI do the analysis and then submitted it. There were one or two guys who, yes, they used AI, but then they checked the work, they did some more work, and it was so clear who had actually gotten past the simplicity of the AI first step. I encourage that, not just at the top of the funnel, but at the bottom of the funnel as well when you're closing in on an LOI.

The takeaway from this slide is the more that you can get the category that you're interested in right to begin with, the better, because you may find, as Sam Rosati did, that it wasn't just, I'm going to buy this business and operate this business. It was, I'm going to buy this business, and then I'm going to want to buy another one, and another one, and another one. Growth through M&A is often part of the story. What you really want to try and do is get narrow in a category that you see yourself potentially being excited about for 10 years, 15 years, not just, all I need to do is buy one business, and then I'm going to be good. It may be, but probably not. Try and pick the category wisely because all of the reputation that you build, all the businesses that you buy, all the conversations that you have, they compound over time, and if you're just going to do it once to buy one business, you leave a lot of that value on the cutting room floor.

These are the three pillars. There's lots of ways to think about this, but I kind of like this, and everybody likes either one thing to remember or three things to remember, certainly not more than five. In a world full of AI and spammy shortcuts, focus, authenticity, and hard work will still pay off. Thank you. Please keep in touch. Contact information on the left. Lots of free information on the right. Appreciate the opportunity to SMBash and everybody a part of it for letting me get on the stage. Thank you all.

Q&A

Question (Jackie): I have been talking about this on Axial. I found that most of the buyers were very high level. I did weed out a bunch of people that had a semi-filled out profile, and the ones that were serious and showed they had closed deals in that space, I did do that, and I don't think that the people on Axial realize the work that went into it.

Peter: Jackie was reinforcing that the broker must winnow the process at some point. That's not something that high-end investment bankers do, but brokers do. Brokers get paid if a transaction closes. It's a zero-sum game. They have to find one buyer for one seller. It's not an angel round. You're not going to have 25 people on the cap table. You've got to find one buyer for one seller. When they're ghosting you, when they're ignoring you, when they are annoying the heck out of you, it's because they rightly or wrongly have done the calculation and said, it's not a good use of my time to be negotiating with this counterparty on their redlined NDA, or I don't see enough in their online profile or from a preliminary conversation to make me think that I can put this buyer in front of this seller.

Remember, every time a broker vets a buyer and introduces them to the seller, their work is on the line. If they introduce a jerk or they introduce someone who's clueless or poorly researched to their client who has paid them a retainer and is paying them multiple percentage points of the purchase price, and then they introduce them to some unprepared buyer, it looks really bad, creates a lot of tension in their relationship with the owner, and it can lead to a termination of the agreement. Ultimately, there's maybe a tail period, but you have to remember the broker's position. They can't just introduce anybody who's interested in a deal, so you have to go through this winnowing process. Some of them do it transparently. Some do it gracefully and respectfully. A lot of them are just like, I know this game. I'm not going to even respond to you. I'm just going to blow you off if I don't think you're legit.

Question (Jillian): Hi, Peter. I'm a first-time searcher. I think you laid out a really smart framework and it makes a lot of sense. A lot of what you suggested is applied to people who've done that before. Going back to the example you gave of the guy who acquired the gifted novel food business, he was a first-time searcher. I'm curious if you could try to apply your framework to someone who's a first-time searcher and maybe isn't as focused as a fully prepared entrepreneur.

Peter: To repeat the question, this is a 201 talk. Some of this material is a lot easier to execute when you're a little further along. What's the best way to apply the material of this talk when you are a first-time searcher with not a lot to show for yourself yet in terms of trying to be the buyer of choice?

The two things that I think matter a lot are finding some way to get narrow. You don't have to say you're only going to focus on high-end premium pet brands. It doesn't have to be that narrow, but I do think you need some way to tell a story about yourself. Imagine you are the product, and you're on a shelf with all of these other products. That is a little bit what you're up against. If you go to the grocery store, there's a zillion kinds of cereal, and they've all worked really hard to be like, this is the front of our cereal box, and this is how we're going to try, and we want to be positioned at eye level. You have to really think about yourself as the product.

When you don't have lots of transaction history or none, and you're earlier on, the two things that matter are having some way to get narrow, and you should tinker with that. I don't think you should feel like that's a one-way door where I'm only going to do this. Pick a category for a quarter. Over the course of 12 months, pick four categories. You'll spend time on each category for 90 days, and just edit your narrative about yourself as you're in those respective categories. It's not like you're making this decision that you can't reverse out of. But getting narrow matters. Then you've got to be really good at messaging, and you've got to be a bit of a sales and marketing monster.

That's why in the traditional search fund space where there are all these search funds putting capital behind searchers, one of the things they look for is just how relentless and tenacious is this person, because they know that a big part of the game and succeeding is salesmanship and relentlessness and funnel management. Hard work, messaging, and getting narrow are things that you can do even when you don't have a background. Obviously, the other things you have to work your way to, and then you put those feathers in your cap, and you accelerate even more.