How to develop a deal origination process from a PE perspective
What is deal origination used for?
Businesses take part in deal origination to:
What is deal origination?
Deal origination is a technique used by businesses to produce sales deals and by financial experts to locate investment opportunities. To submit the most competitive bid, it entails learning about potential deals you could make or making a deal. Also known as deal sourcing, it comprises the following components:
Approaches to deal origination
There are several methods you can use to find out about market investment opportunities. Here are a few standard approaches:
Network deal origination
This strategy, which is the most conventional deal origination technique, entails getting in touch with well-known professionals to locate source deals, which you can then assess and possibly bid on. Successful network approaches depend on the following elements:
Contract deal origination
Specialized individuals or firms are available on an assignment basis. They frequently work with multiple clients, have a great deal of deal origination experience, and are paid based on how well they do in generating leads for your business. When you need more help but don’t want to hire a full-time employee and they have more experience than you, using contract workers to assist you with deal origination may be the best option.
In-house deal origination
Additionally, businesses have the option of employing their own knowledgeable finance experts to find deals in the marketplace. The experts carry out the deal origination process exclusively for their organization while working as permanent employees. Their responsibilities may include:
Online deal origination
The online deal origination process takes place when you use technology to connect your company with additional interested parties. Companies employ an online strategy to find opportunities on both the buy-side and sell-side of the market. Although this is a new technique for originating deals, it is quickly gaining acceptance. There are numerous platforms for finding deals, including Dealsuite, Navatar, DealCircle, and Intralinks DealNexus.
Benefits to using online deal origination
Online deal sourcing platforms produce benefits such as:
Wider access to potential buyers
Technology allows you to connect with and interact with potential customers who may not be in your personal network. Online deal sourcing platforms open up new channels for finding and pitching leads by enabling financial professionals with comparable interests and objectives to communicate. These platforms enable users to publicly announce their buying or selling intentions, allowing you to respond and complete deals virtually.
Personalization of algorithms
The online deal sourcing platforms classify investment firms and their business objectives using customized algorithms. You can target customers who are most likely to invest in your business as a user, which will save you time and money. The platforms offer filters such as:
Quantification of results
Utilizing online deal sourcing tools, you can assess how well your company is performing in the market. You can monitor your conversion rates during the deal sourcing procedure and use time stamps to pinpoint the moments when your business was successful. The key performance indicators (KPIs) that the online platforms quantify allow you to evaluate your performance for upcoming deal sourcing projects. Examples of the KPIs include:
Tips for using deal origination
Take into account the following advice as you improve your company’s deal origination strategy:
Know your contacts
Despite the rise of online deal origination, the network approach is still effective, so it’s critical to know information about your contacts. Make a list of the companies in your network and group them according to their size and sector, for instance. Additionally, you can keep track of previous transactions with them so that you can contact them if you need insider information. You can stay organized for upcoming deal sourcing efforts by maintaining a thorough and updated list of your contacts.
Take advantage of network opportunities
All efforts to find deals can benefit from networking with financial experts. Increase your company’s marketability by fostering relationships with companies in formal settings, such as conferences and trade shows. It might be simpler to close a deal when deal sourcing opportunities present themselves if you are already familiar with potential buyers.
Track changes in your industry
It’s critical that you understand any changes and how they may affect your strategies because the market landscape may change over time. For instance, new businesses could enter the market, increasing competition for your company. Additionally, previous rivals may switch industries, giving you more unrestricted access to potential customers. Additionally, businessmen in your network might retire, providing deal sources you can use. By keeping tabs on changes in your sector, you can base your deal sourcing strategies on accurate, current information.
Learn about the competition
Because your company competes with other businesses for contacts, insider knowledge, and deal sourcing during deal origination, you might need innovative strategies to improve your company’s reputation. Here are some methods for evaluating your rivals so you can enhance your own procedures:
Make a holistic effort
Building a strong reputation is the first step to being successful at deal origination, and this effort might involve several departments within your company. For instance, while members of your team who work in finance connect with industry contacts or oversee activity on social media platforms, your social media and marketing teams can develop your brand as a professional. You can start blogs that advertise your organizational objectives and business interests for potential clients and contacts to read before they decide to work with you. You can connect with customers on social media as well.
FAQ
What is deal origination platform?
Deal sourcing, also known as deal origination, is a method used by financial experts like investment bankers, venture capitalists, and corporate development specialists to find investment opportunities in the market.
What is origination and execution?
The process by which investment bankers, attorneys, and other financial intermediaries “originate” the mandates to advise on companies’ transactions is known as “M&A deal origination,” also known as “deal sourcing.”
What is a deal in banking?
Building and maintaining client relationships while showcasing the bank’s capabilities in order to win transaction mandates is the process of origination. The process of guiding a client through the steps to complete a transaction is called execution.
