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May 24th, 2018

Pandora’s Box

Pandora’s Box was one of the first early look marketing lures, one that left only hope remaining in the box. Backstage passes for rock concerts, inside the ropes tickets for golf tournaments, lift the velvet ropes at a hot club, a visit to the broadcast booth at a baseball game: each of these are the hallmarks of access and a marketer’s gold. Beaujolais nouveau, a red wine made from the Gamay grape, is fermented for only a few weeks and released for sale at 12:01 a.m. on the third Thursday of November. For years, the first bottles were flown to New York in the cockpit of the Concorde to heighten the marketing spectacle and the pleasure of being the first to imbibe. Early access marketing began to formally creep into the private equity business a few years ago. Agents for transactions recognized a way to simultaneously increase the efficiency and the allure of their marketing efforts by scheduling a handful of early meetings with qualified buyers before the formal marketing process began.

These processes began as a casual, “The CEO happens to be in town” invitations. As their effectiveness grew, (some bankers estimate 90% of their buyers arise from the “early look” groups), the informal gave way to fuller presentations and rising marketing frippery. The meetings are now labeled gold card meetings, platinum card meetings, red carpet meetings, fireside chats, blue light specials and a host of other rare metal events. Nevertheless, they serve as an efficient funnel for the sellers and the bankers by previewing an asset for sale to a group of buyers with adequate capital and industry knowledge while notifying the market a competitive process is about to begin. Since private equity is governed by The Invisible Hand, many gold card attendees use the early access as a way to spring ahead of the intended process. This results in a tug of war with the seller over early access to management, data and operations followed by attempts to get the seller to shut down the process early. These efforts by the buyers have varying levels of success. Sometimes setting forth a premium priced fully financed bid will result in a purchase and the prevailing PE firm telling its investors it does not participate in auctions, it preempts them. If the preemption fails, the PE firm incurs substantial broken deal costs and time to listen to Pandora.

I’m Rob Morris and I approved this blog.

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