Deal sourcing or deal origination
is a term used by
finance
Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...
professionals such as
private equity
Private equity (PE) is stock in a private company that does not offer stock to the general public; instead it is offered to specialized investment funds and limited partnerships that take an active role in the management and structuring of the co ...
investors and
investment bankers
Investment banking is an advisory-based financial service for institutional investors, corporations, governments, and similar clients. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by unde ...
to describe the process by which firms identify investment opportunities. The term can apply to venture capital or private equity. Ensuring that a larger volume of deals are sourced is imperative to keeping up a viable
deal flow.
Thus, most
venture capitalists
Venture capital (VC) is a form of private equity financing provided by firms or funds to start-up company, startup, early-stage, and emerging companies, that have been deemed to have high growth potential or that have demonstrated high growth in ...
,
private equity investors, and
investment bankers
Investment banking is an advisory-based financial service for institutional investors, corporations, governments, and similar clients. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by unde ...
use various methods and origination strategies to source deals. While some firms reach out to teams of specialists to help with the deal sourcing process, others may use in-house resources. Investment banks usually provide deals to both the buy-side and the sell-side. Both buy-side and sell-side opportunities are sourced.
Traditional approach
Deal origination
largely depended on a broad network of contacts and a good reputation. Having an industry-specific knowledge and an idea of similar deals taking place in the market was considered an added advantage with respect to placing a
bid.
The traditional deal origination method establishes direct relationships with owners of companies. Private equity firms focus efforts on certain industry verticals or sub-sectors based on fund mandates and portfolio composition. Buyers may cultivate these relationships directly, engage a specialized third party to proceed with a proactive approach, or rely on passive methods including online deal sharing forums, or sell-side processes. Specialized third parties consist of buy-side consulting firms.
Online deal sourcing
Traditional methods of deal origination are fast giving way to online deal sourcing platforms for buy-side and sell-side opportunities. Several financial technology companies around the world provide services to users to enable them to go beyond their network of contacts and source deals on the basis of a variety of criteria. In addition, online deal sourcing is considered vital in M&A transactions.
There are various online deal sourcing platforms available.
See also
*
Private equity firm
A private equity firm or private equity company (often described as a financial sponsor) is an investment management company that provides financial backing and makes investments in the private equity of a Startup company, startup or of an existin ...
*
Project finance
Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a project financing structure involves a number of eq ...
References
{{reflist, 1
External links
The definition o
Deal sourcingon Divestopedia
Venture capital
Private equity
Private equity firms
Financial technology
Financial technology companies