Deal origination is a method that involves finding opportunities for investment, whether it’s private equity, venture capital, or other financial players. Deal origination involves either spotting potential investments and pitching directly to clients or negotiating deals by acting as an intermediary in a transaction.
Traditional deal sourcing relies on corporate connections and networking. Companies looking to raise money or buy companies rely on these networks for information on the market. This is a time-consuming method that requires access to business owners who are likely to be part of the firm’s immediate circle and an association with intermediaries for investment.
Alternatively, bigger investment banks have an internal team that is focused on deal sourcing, with finance experts working full-time to create leads and build a pipeline of potential investments for their companies. The success of this method is dependent on the reputation and ability to execute of these professionals that is why it’s suitable for established investment firms with a history of successful deals in their portfolios.
It’s important for any investment bank to search for new deals and keep a healthy M&A pipeline however it’s difficult to manage without the proper technology and tools to do so. Financial technology companies have created platforms that enable finance professionals and investors to generate and identify deal opportunities via automation. These platforms can sort out leads inbound and outbound by defining criteria such as industry, transaction value, and even location. This will reduce the time spent on the internet for potential opportunities.
Some of these platform suppliers also provide services to smaller organizations that don’t have the financial resources to build their own origination teams. For instance, CAPTARGET is a service which offers a fee model to assist small brokerage firms and investment banks find deals. These services can help you save money and gain more leads by giving you access to a huge database.
In addition to these solutions for technology, investment banks also have a number of other options to source deals. They could, for instance, send an annual list of their buy-side and sale-side orders to potential clients. They may also be able to identify opportunities to invest in the market and present clients with these opportunities, and earn a commission when the transaction is completed. This method is time-consuming and risky, but could be successful in the event that an investment banker has good relationships with blue-chip firms. A major US investment firm recently closed an agreement worth USD 2 billion with an Indian firm, following extensive deal-sourcing efforts in India. The bank was able to complete the deal thanks to its knowledge of Indian economy and the Indian culture. It also worked with an investment bank in India to ensure that it was handled with care. It is this level of knowledge and dedication to quality that makes dealing with an investment types of synergies bank such an asset for any business.