Why most good companies are not for sale

Every acquisition programme eventually runs into the same wall. The banker flow is good, the team is competent, the thesis is sound — and the last four processes were lost on price to someone with a lower cost of capital or a better strategic reason to overpay.

The diagnosis is usually framed as a sourcing problem. It is more precisely a selection problem: the channel that produces the deals is one that selects, by design, for competition.

What an intermediated process is for

A sell-side mandate exists to create competition. That is its stated purpose and there is nothing improper about it. The banker builds a buyer list, runs a structured process, sets a timetable, and extracts the highest price the market will bear. The seller is paying for precisely that outcome, and a good banker delivers it.

Buying inside that process means buying the output of a machine built to work against your price. It also means:

• Information symmetry against you. Everything you are shown has been prepared, reviewed, and shown to others.
• A timetable you do not set. Diligence windows and bid dates are chosen to maintain tension, not to let you think.
• A management team that has been rehearsed. You are meeting a presentation, not a business.
• A price discovered by auction. Which is the correct price for the seller and, structurally, the wrong one for you.

None of this argues for abandoning banker flow. It argues for not letting it be the only channel, because it is the most expensive one available.

Where the companies actually are

The owner of a profitable, unglamorous, founder-held business doing eight million dollars of revenue has usually never spoken to an investment bank. There is no confidential information memorandum. There is no letter of intent in a drawer. He has thought vaguely about what happens in five years, and has done nothing about it, because there is no forcing event and running the business takes all week.

He is reachable. He is simply not reachable by waiting.

He is reachable by someone who knows his company exists, knows what it actually does, knows who owns it, and writes to him in terms that make sense to a business owner rather than to a deal professional. That last point is not a nicety. The reason most direct outreach fails is not that owners will not sell. It is that the message reads as though it were written for someone else.

Coverage, not relationships

The industry’s standard explanation for proprietary deal flow is relationships. Relationships are real and they matter, but as an explanation they are mostly retrospective: an advisor who found a company will tell you afterwards that they knew someone. What actually happened, in the great majority of cases, is that somebody knew the company existed.

That is a coverage problem, and coverage has a hard ceiling in every commercial database of private companies. Those databases are built the same way — someone paid to have the data assembled, and everyone who pays gets the same rows. If your thesis can be expressed as a filter in the tool, it can be expressed by every other fund holding the same subscription. You are competing on a list you share with your competitors.

The companies that matter are disproportionately the ones the databases miss:

• no public filings, because there is no obligation to file;
• a single-page website that describes the business in the owner’s words rather than in an industry vocabulary;
• a company name that says nothing about what it does;
• an industry classification code chosen once, at incorporation, by an accountant.

Finding them means reading the open web at a scale that is uneconomic to do by hand, and then having a person decide what the reading means. Neither half works alone. A filter without judgement returns nine thousand companies, most of which are wrong. Judgement without coverage returns forty, most of which someone else has already called.

What proprietary actually buys you

Three things, none of which is a discount.

A different denominator. When the universe you are working from is the set of companies that exist rather than the set that has been listed, the median opportunity is one nobody else has looked at. That is where the price is.

Time. An owner who is not in a process is not on a clock. A conversation can take four months, which is intolerable inside an auction and entirely normal outside one. Deals made in that register tend to close on better terms, because the terms were discussed rather than bid.

Information you gathered yourself. You know what the business does because you found it and asked, not because you read a document written to sell it.

The honest limits

Off-market sourcing is slower. First qualified owner conversations from a standing start realistically fall between day 45 and day 75, and anyone promising them in week two is describing a list rather than a conversation. Hit rates are low by the standards of an auction process: most owners are not ready, and a substantial share of a target universe will never respond at all.

It is also not a substitute for diligence, for a banker where a banker is warranted, or for judgement about price. It changes what you are looking at. It does not change what you have to do once you are looking at it.

What it does change is the structural position. In an auction you are one of nine. Off-market, for a period, you are the only conversation the owner is having — and that, far more than negotiating skill, is what determines the number at the end.

---

How we build the universe, and what the platform can and cannot do, is set out on the origination page.