Deal origination is the process of identifying opportunities to invest for companies including private equity, venture capital firms, or other financial players. It involves spotting potential investments as they come up and presenting the opportunities to clients or creating deals for them by acting as intermediaries in a transaction.
The traditional method for dealing with sources relies on networking and connections to corporate networks, with companies seeking to acquire businesses or raise funds relying on these sources for information on the market. This method is lengthy and requires access to businesspeople who are likely to be in the firm’s network as well as a connection with an intermediary for investment.
In contrast, larger investment banks have an in-house team that is focused on deal sourcing, with finance professionals working full-time to create leads and build a pipeline of possible investments for their firms. The success of this method is dependent on the reputation and ability to execute of these professionals, which means it’s more suited to established investment firms that have a history of successful deals in their portfolios.
It is essential for investment banks to search for new deals and maintain an active M&A portfolio. However it can be challenging to do this without the right tools and technologies. Financial technology companies have created platforms that allow investors and finance professionals to create and find deal opportunities with automation. These platforms are able to filter inbound and outbound leads using predefined criteria like size of transaction, industry, and location, and reduce the time spent scouring the internet for opportunities.
Some of these platform providers also offer services that can be utilized by smaller groups that don’t have the time or desire to capable of establishing in-house origination teams. CAPTARGET is an example of a www.digitaldataroom.org/what-is-operating-synergy/ platform that provides an arrangement that is fee-for-service to assist small brokerages and investment banks find business deals. These services can help you save money as well as get more leads as they grant you access to a vast database.
Apart from these technological solutions the investment banks also have a number of other options for sourcing deals. For instance they can distribute a monthly list of their buy-side and sell-side mandates to potential clients. They can also identify potential investment opportunities in the market and present them to client companies typically earning a commission if the transaction closes. This is a risky and lengthy process however it could be effective if the investment banker has the right connections with blue-chip clients. For instance, a big US investment bank recently concluded an USD 2 billion deal with an Indian company after conducting extensive deal sourcing in India. The bank was able to get this deal through its knowledge of Indian economy and culture. It also collaborated with a local investment banking firm to ensure that it was in good hands. It is this level of expertise and dedication to quality that makes dealing with an investment bank such a valuable asset for any business.