Deal origination is the process of seeking deals on the buy-side (working with private equity firms to find companies to invest in or acquire) and on the sell-side (working with companies seeking to raise funds or even exit). It’s more than just a critical part of successful investment banking, but is now an essential part of every business seeking to expand. This article will examine the top dos and don’ts of effective deal origination, as well as a few practical strategies that startups are following to improve their efficiencies.
Traditionally, firms have relied heavily on inbound deal flow that they sourced from their connections with intermediaries and owners. This isn’t a reliable way to increase the number of deals and their quality. It’s extremely time-consuming, and it’s challenging to make accurate forecasts and targets when the number of lead sources that could be used can be unpredictably.
Many investment bankers are looking at outbound deal sourcing. This involves searching for specific types in areas where the investment banker has expertise and a network of contacts. This is often done through online platforms such as Axial which provides an accessible database of deal information.
Many investment banks also use technology to automate the process of searching, making finding leads much easier and more efficient. This allows them to focus their efforts on managing and establishing relationships with intermediaries, while also improving their abilities to recognize, qualify and connect with the best investment opportunities at the right time.
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