Deal origination is the process of finding opportunities to invest for companies, private equity and venture capital firms, as well as other financial players. It involves spotting potential opportunities for investment as they arise and presenting them to clients or making deals for them by acting as intermediaries in a transaction.
Traditional deal sourcing relies on connections with corporate contacts and networking. Firms looking to raise funds or acquire businesses depend on these sources to learn about the market. This method is time-consuming 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.
A larger investment bank may have an in-house deal sourcing team that is comprised of finance professionals who work full-time to generate leads and developing a pipeline of investments for their firm. The success of this method depends on the reputation as well as execution capabilities of these professionals, which means it’s more appropriate for established investment firms that have a history of http://www.digitaldataroom.org/what-is-operating-synergy successful deals in their portfolios.
It is essential for any investment bank to search for new deals and maintain an active M&A pipeline but it’s a challenge to manage without the proper technology and tools. Fortunately, companies in the field of financial technology have developed platforms to assist finance professionals and investors generate and source possible deal opportunities through automation. These platforms can filter inbound and outbound leads according to predefined criteria such as size of the transaction, industry and location, and reduce the time spent scouring the internet for opportunities.
Some of these platforms also provide services to smaller companies that don’t have the funds to build their own origination teams. CAPTARGET, for example, is a company that offers the option of a fee-based model to help small brokerage companies and investment banks find deals. These types of services could help you save money and increase the quantity of leads because they provide access to a vast database of potential investors.
Investment banks have other options to source deals in addition to these solutions that are technological. They can, for example send an annual list of their buy-side and sale side mandates to potential clients. They can also find investment opportunities in the marketplace and pitch clients to companies that they represent typically earning a commission when the transaction closes. This is an expensive and time-consuming process however, it is a viable option provided the banker is in the right relationships with blue-chip clients. A large US investment company recently concluded the USD 2 billion merger with an Indian company after extensive deal-sourcing operations in India. The bank was able to close this deal because of its extensive understanding and knowledge of Indian culture and economy. It also collaborated with a local investment banking firm to ensure it was in good hands. It is this level of knowledge and dedication to quality that makes working with an investment bank an asset for any company.