Private equity relationships can be among a law firm’s most valuable sources of business, but there’s often a significant difference between representing a sponsor and developing relationships across the companies it owns. A firm may handle fund formation, platform acquisitions and major transactions for a sponsor while having limited involvement with its portfolio companies. Meanwhile, those businesses are growing, acquiring competitors, entering new markets and encountering legal issues that could involve several of the firm’s practices.
For legal marketers and business development professionals, this presents an opportunity to take a more strategic approach to private equity client development. Understanding the sponsor’s investment strategy is important, but examining the activities of its portfolio companies can reveal additional opportunities to strengthen relationships, introduce colleagues and expand the firm’s work.
The challenge is that portfolio company business development often falls between existing responsibilities. The private equity team may focus primarily on sponsor relationships and transactions, while other practice groups may have limited knowledge of the portfolio or the relationships that already exist. Without a coordinated process, firms can overlook opportunities that are connected to clients they already represent.
Here’s how business development teams can help change that.
Start by Mapping the Entire Sponsor Relationship
Before identifying new opportunities, firms need to understand the work they’re already doing for the sponsor and its portfolio companies. This requires looking beyond the matters handled by the primary relationship partner and examining activity across practices, offices and client entities.
Begin by identifying the sponsor’s current portfolio companies and matching them against the firm’s client and matter records. Determine which companies the firm represents, what types of work it handles and which lawyers maintain the relationships. The analysis can include fund formation, platform acquisitions, add-on transactions, financing, employment, regulatory matters, commercial contracts and exits.
This exercise can reveal important patterns. A firm may regularly handle platform acquisitions but have little involvement in subsequent add-ons. It may advise the sponsor on fund formation and financing while performing almost no work for the underlying businesses. In other situations, the firm may have substantial relationships with individual portfolio companies that aren’t fully connected to the broader sponsor relationship.
Understanding these patterns gives business development teams a clearer picture of where the relationship is concentrated and where additional research may be useful. It also provides a foundation for conversations with the relationship partners about the sponsor’s preferences, the role of portfolio company management and the reasons certain work may be handled elsewhere.
Identify Opportunities That Extend Beyond M&A
Private equity business development can become heavily focused on transactions, particularly when a firm’s relationship with a sponsor is managed primarily by corporate lawyers. Yet the businesses within a sponsor’s portfolio have ongoing legal needs that extend well beyond acquisitions and exits.
A manufacturing company expanding internationally may encounter employment, tax, commercial contracting and international trade considerations. A healthcare services platform pursuing add-on acquisitions may need regulatory advice, financing support and assistance integrating newly acquired businesses. A technology company preparing for growth may have intellectual property, privacy and commercial matters that require specialized experience.
Business development professionals can help connect these activities with the firm’s broader capabilities by researching portfolio companies and identifying developments that may be relevant to other practices. This involves understanding what the businesses do, how they’re growing and which lawyers within the firm have experience that could be useful.
The research can also help teams identify common themes across a sponsor’s investments. If several portfolio companies are expanding into Europe, for example, the firm may have an opportunity to discuss its cross-border capabilities with the sponsor or develop programming for portfolio company executives who are managing similar challenges.
The opportunity becomes more meaningful when the team can explain why a particular capability may be relevant to a company’s business and identify the appropriate relationship through which to initiate a conversation.
Look for Patterns in the Work the Firm Isn’t Getting
One of the most useful exercises a business development team can undertake is examining the differences between the work a firm performs for a sponsor and the work it performs for the sponsor’s portfolio companies.
Consider a firm that handles several platform acquisitions for a sponsor but is consistently absent from subsequent add-on transactions. That pattern warrants investigation because it may indicate that portfolio company management selects its own counsel, another firm has an established relationship or the sponsor has different preferences for smaller transactions.
A similar pattern may emerge when a firm handles financing matters for several portfolio companies but receives little corporate work, or when it represents individual portfolio businesses without developing additional relationships across the sponsor’s other investments.
These findings provide useful questions for the relationship team. How are outside counsel decisions made? Which matters are controlled by the sponsor and which are handled independently by portfolio company management? Are there capabilities the sponsor associates with the firm that could be relevant to other businesses?
The answers may reveal opportunities, but they can also explain why certain work isn’t available. A portfolio company may have a longstanding relationship with another firm or require capabilities that the existing firm doesn’t provide. Understanding these circumstances helps the team develop realistic business development priorities and avoid making assumptions based solely on gaps in the matter data.
Create a Targeted Portfolio Company Prospect List
Once the firm understands the existing relationship, the next step is identifying which portfolio companies warrant additional attention. Attempting to pursue every company in a sponsor’s portfolio can spread business development resources too thin, particularly when the businesses operate in different industries and have distinct legal needs.
A targeted list can be developed by considering the company’s strategic importance, current activities, existing relationships and alignment with the firm’s capabilities. Companies pursuing acquisitions, expanding internationally or operating in sectors where the firm has significant experience may warrant closer examination.
The team can then research each priority company to understand its operations, ownership, geographic footprint, recent developments and potential legal considerations. This research can help identify the relevant practices and determine which lawyers may be appropriate to involve.
For example, if a sponsor owns several healthcare services companies, the firm may want to identify those pursuing acquisitions, entering new markets or expanding their service offerings. The business development team can work with healthcare, corporate and regulatory lawyers to determine which companies align with their experience and where existing relationships may provide an opportunity for engagement.
The result is a focused list supported by research, internal relationship information and a clear understanding of why each company has been identified.
Make the Relationship Partner Part of the Process
Portfolio company business development requires coordination because the sponsor relationship may involve several lawyers and the individual businesses may have their own management teams and outside counsel relationships.
A business development professional who identifies an opportunity involving a portfolio company needs to understand the existing relationship before recommending outreach. The sponsor relationship partner may already be discussing the company’s plans with investment professionals, while another lawyer may have a direct relationship with its general counsel.
Working with these individuals helps the team identify the appropriate approach and avoid duplicated communications. It also provides an opportunity to understand the sponsor’s expectations and determine whether an introduction through the sponsor would be appropriate or whether the portfolio company makes its own legal purchasing decisions.
Business development teams can facilitate internal meetings that connect the sponsor relationship partner with colleagues in other practices, prepare relevant experience and coordinate follow-up. These activities help ensure that the firm approaches the relationship with a clear understanding of the company’s circumstances and the people involved.
The relationship partner remains central to the process, but business development professionals can provide the research, organization and coordination needed to identify opportunities that might otherwise receive limited attention.
Develop a Portfolio Company Monitoring Program
A portfolio company prospect list is useful when it’s created, but its value diminishes if the information isn’t updated as the businesses evolve. Sponsors may acquire or sell companies, portfolio businesses may complete additional transactions and changes in management or strategy can alter their priorities.
Business development teams can establish a monitoring process for selected portfolio companies to maintain visibility into significant developments. The process can focus on acquisitions, financings, leadership changes, geographic expansion and other activities relevant to the firm’s practices.
When a development occurs, the team can review its significance, examine the company’s existing relationship with the firm and determine whether additional research is needed. The information can then be shared with the appropriate relationship partner, along with relevant context and a proposed next step when warranted.
For example, if a portfolio company announces an acquisition in a new market, the team can investigate the transaction, determine whether the firm is involved and identify colleagues with relevant experience. The relationship partner can then decide whether the development provides an appropriate reason to reconnect with the sponsor or company management.
A consistent monitoring process helps keep portfolio company business development active between transactions and regular account meetings. It also allows the firm to recognize developments that may be relevant to multiple practices.
Turn the Research Into a Practical Account Plan
The research becomes valuable when it’s connected to specific business development activities. A lengthy report identifying potential opportunities across a portfolio may provide useful information, but it needs to be translated into priorities, responsibilities and follow-up.
For each priority portfolio company, the account plan can identify the existing relationship, current firm matters, relevant business developments, applicable practice capabilities and the lawyer responsible for coordinating activity. The team can then determine whether the next step involves additional research, an internal discussion, an introduction or a client meeting.
Regular reviews with the sponsor relationship team can help maintain momentum and identify where priorities need to change. These meetings provide an opportunity to discuss new developments, evaluate previous outreach and determine whether additional colleagues need to participate.
Business development professionals can also track introductions, meetings, pitches and new matters through the firm’s existing systems. Reviewing this activity helps demonstrate the contribution of portfolio company initiatives and provides insight into which approaches are generating meaningful engagement.
The account plan can evolve as the sponsor makes new investments, exits existing businesses and changes its investment strategy, allowing the team to maintain a current understanding of the relationship.
Use Portfolio Intelligence to Strengthen the Broader Sponsor Relationship
Research into portfolio companies can also provide useful information for conversations with the sponsor itself. Understanding the activities of individual businesses helps relationship partners develop a more comprehensive view of the sponsor’s investments and the issues its management teams may be encountering.
A sponsor with several businesses pursuing international expansion, for example, may be interested in a discussion about common legal considerations across jurisdictions. Another with portfolio companies completing frequent add-on acquisitions may benefit from a conversation about transaction execution, financing or post-acquisition integration.
Business development teams can use these themes to develop targeted client briefings, industry roundtables, portfolio company workshops and other initiatives that reflect the sponsor’s investment activities. The programming can create opportunities for lawyers from multiple practices to contribute their experience and develop relationships with additional contacts.
The firm can also use its understanding of the portfolio to prepare for future investments and exits. Research into the sponsor’s investment focus, acquisition history and portfolio developments can inform discussions about its strategy and help lawyers identify relevant experience for upcoming opportunities.
These activities create additional ways to support the sponsor relationship while developing connections across its portfolio.
Make Portfolio Company Development an Ongoing BD Priority
A private equity relationship can involve many more businesses, decision makers and legal needs than the matters associated with the sponsor alone. Understanding those connections requires a deliberate approach to research, relationship mapping and collaboration across practices.
Business development professionals can play an important role by identifying gaps in the firm’s existing work, researching priority portfolio companies, coordinating with relationship partners and establishing processes for monitoring developments and following up on opportunities.
The most useful starting point is a review of one significant sponsor relationship. Map its portfolio, examine the firm’s existing matters, identify several companies that align with the firm’s capabilities and work with the relationship partner to develop a focused plan. That exercise can reveal where additional research is needed, which relationships warrant attention and how the firm can expand its understanding of an important client.
By incorporating portfolio company intelligence into regular account planning, firms can develop a more complete picture of their private equity relationships and create a consistent approach to identifying opportunities throughout the investment lifecycle.
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