Welcome to the first post in a series discussing proprietary transaction databases (also known as an experience database) in professional service firms. This series is a practical guide that discusses how investment bankers, lawyers and accountants can capture and create insights from transactions they have advised to provide better advice to clients and improve their organization. This series was inspired by the feedback we received from a post earlier this month explaining 10 ways our customers use closed transaction data to run their advisory practice. Please sign up to receive an email notification when the next post is available.

“The single most important thing to look for in an M&A advisor is experience”

4 Things to Look For in an M&A Advisor, April 19, 2016 at Axial.net

Why are deal databases rising in popularity?

“The PE group constantly asks us for information about closed deals”, said a group of frustrated marketing and business development team members at a high profile law firm, “we spend a lot of time looking through documents and press releases but it is time consuming and often inconsistent.”

This conversation plays out in almost every demonstration we provide to marketing and business development professionals. The reason advisory professionals seek this information is because relevant experience and the market intelligence gathered from that experience is why prospective clients hire M&A advisors.

Deal databases are everywhere. As a transaction advisor, you should care about your competition from other service providers and Google. The internet has given us unlimited access to information. Shareholders can google “business valuation” and within 20 minutes determine an approximate value of their business and appropriate deal terms. As a corporate transaction advisor you are selling knowledge and advisors are being challenged to add value to clients in new ways.

Sophisticated advisors spotted this years ago and invested in data by implementing processes and tools so their organization could record transaction intellectual property data. These records provide the advisor an unparalleled insight into trending transaction terms to better advise clients.

So the bad news is if your advisory practice does not maintain a deal database you are behind your competitors. The goods news is that you are in the right place to learn about how to implement a deal database for your organization. If you already have a database solution in your firm we hope you might pickup some useful insights to better manage your data and opportunities to add new value to clients.

What is a deal database?

A deal database is the collection of the same quantitative and qualitative data for multiple transaction records. The most common transaction types for investment bankers and lawyers are mergers, acquisitions, equity financing and debt financing but any type of transaction can be recorded. Each transaction record at a minimum contains information regarding the parties involved, what is being purchased or sold, financial terms, and legal terms of the deal.

What is a “proprietary” database?

We have identified three different types of M&A databases based on the source of information used to populate the transaction records:

1) A top down database is a collection of transaction records created using public information. This information is sourced from press releases and media coverage. This type of database represents the largest number of total transactions stored. The information contained in these records is limited to the details released to the public and this often excludes this like deal value, earnings numbers and legal deal terms – all items that are very important to advise clients. MergerMarket, Bloomberg and S&P Capital IQ are all examples of top down databases.

2) A bottoms up database or proprietary database is a collection of transactions recorded by a deal insider (lawyer, banker, etc.). This type of record has full transparency to the key financial and legal deal terms. A bottoms up database is limited to only the transactions that the insider firm has advised. This means they offer substantially less deals than a top down database. A number of examples of bottoms up databases are provided in the following section.

3) A mixed database is a combination of a top down and bottoms up database. This information is often a mix of full transparency data from insider deals and publicly announced third party deals. A mixed database is common amongst advisors who specialize in a particular sector.

The chart below depicts the database universe and demonstrates the tradeoff between a large data set of transactions in a top down database and full transparency of details with fewer transactions as you move to a Bottoms up database.


Deal databases in practice

Proprietary transaction databases are used as a competitive advantage by advisors to promote the experience and IP of their firm from past transactions they have advised. Here are some examples of how advisory firms use their proprietary deal database to market their firm directly or indirectly through research:

  • Kirkland & Ellis is a leading corporate M&A law firm. The chart below tells us that their proprietary deal database – CTRAN – captures the transaction type, financing source/s and the fee structure of the deal. These insights and others are published regularly in K&E’s PE Newsletter.

Database access for cross-functional teams a must

The information contained in a database is valuable to each function in your advisory firm. It is best practice to restrict access permissions by user account to ensure confidential data is not disseminated erroneously and the data accuracy remains intact. Three typical user permissions are:

  • Read-only permission restricts users’ ability to manipulate information.
  • Write permission allows user to create and edit a record.
  • Administrative permission allows user to read, write and change structure of data by adding new fields or restricting type of data entered.

Organizational databases allow a further level of control be segmenting access to individual records stored in the database and the database structure itself.

  • Records-only access would restrict select user permissions (read, write, admin) to only the data/records stored in the database.
  • Database-only access would restrict user permission to only modify the database structure/fields.
  • Database Owner access would allow user permission for data/records and database structure.

A single database with cross-team access encourages user engagement and ensures each team is using the most up to date and accurate information. From our experience at least four functions in your advisory organization would benefit from access to the deal database:

  • Advisory. This is the team working with clients on engagements. The deal database is an important source of information to better advise clients on financial and legal terms. A database will be of most value to an Advisory team members if it is a bottoms up database which contains between 100 and 300 data points on at least 50 transactions.
  • Marketing. The marketing department creates collateral to market the services of the firm. This collateral may benefit from a transaction database if you can store tombstones next to a completed transaction, or provide analytical insights for social media announcements, press releases and research articles. In addition marketing teams are typically responsible for presenting closed deal numbers to league tables.
  • Partners. Real-time access to information is critical in today’s business environment. Allowing partners access to deal data provides them the ability to prepare for client meetings on the go without the need to call an Associate to go through the records.
  • Governance. Executives are using data as a primary tool to drive decision-making for their organization. The right type of database can provide operational benchmarks for team performance, allocate cost to jobs, provide insights into pricing of new engagements and show differentiation and market-position strengths in sectors and client types that you frequently serve. Check out our post discussing 10 ways our customers are using closed transactions to run their business.

Transaction database software

M&A professionals use three categories of software to record, access and analyze their transaction data.

  1. Spreadsheet software. Excel is the most common tool being used by small and medium sized firms. With a small team it is hard to beat the availability, low incremental cost, familiarity, and analytical power of Microsoft Excel.
  2. Non-technical database software. This category is the next level up from Excel in terms of functionality for organizations. The first database product used in desktop applications was Access released in 1992 by Microsoft. Today, users demand more collaboration and an easier way to store data with the rise in cloud computing and SaaS delivery. These solutions offer the simplicity of Excel but include user permissions, collaboration features and cloud delivery, and in the case of Pitchly, functionality specifically for deal advisors.
  3. Technical database software. At the opposite end of the spectrum from Excel are the technical database solutions from Oracle, IBM and alike. These platforms allow unlimited functionality and customization at a substantial financial and time cost to customize and implement. These solutions often require technically trained database engineers to manage deployment, integration to existing tools and regular maintenance.

Stay tuned for the second post next week and if you haven’t already signup to receive the post to in your inbox.

About Pitchly

Deal professionals use Pitchly to record and share deal intelligence and tombstones easily. Professional service firms use Pitchly to record information about transactions they advise to better advise and market to clients. Pitchly makes it easy to distribute, audit and manipulate this information while automating transaction tombstones to market firm experience. Customers can migrate or create a new proprietary transaction database in minutes. Request a demo now!


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