Deal Origination in Investment Banking

Deal origination is the process that involves identifying opportunities to invest, whether for private equity or venture capital or other financial players. Deal origination is the process of identifying potential investments and presenting them directly to clients, or creating deals through acting as an intermediary in a transaction.

Traditional deal sourcing relies on corporate connections and networking. Firms looking to raise money or acquire companies rely on these sources to gain information about the market. This is a time-consuming method that requires access to business owners who are likely to be in the firm’s immediate network and an association with intermediaries in the investment industry.

Other investment banks have an in-house team that is focused on deal sourcing, with finance experts working full-time to generate new leads and to build a pipeline of possible investments for their businesses. The success of this strategy depends on the reputation as well as performance capabilities of these professionals and is therefore more suited to established investment firms with a history of successful deals in their portfolios.

It is vital for any investment bank to discover new deals and keep a healthy M&A pipeline however, it can be difficult to manage without the right technology and tools to do so. Financial technology companies have developed platforms that enable finance professionals and investors to generate and identify deal opportunities via automation. These platforms can sort out leads inbound and outbound according to predefined criteria, like the type of business, the value of transactions, and even location. This can reduce the amount of time spent searching on the web for opportunities.

Some of these platform providers also provide services to smaller companies that do not have the resources to create their own origination teams. The CAPTARGET service is an example of a service that offers a fee-for-service model to help small brokerages and investment banks find business deals. These types of services can help you save money and increase the number of leads by providing access to a huge database of investors who are looking to invest.

Investment banks also have other methods to source deals in addition to these technological solutions. For instance, they could distribute a monthly list of their sell-side and buy-side mandates to prospective clients. They can also find investment opportunities on the market and present clients with these opportunities, and earn a commission when the transaction is completed. This is an expensive and time-consuming process however it could be effective in the event that the investment banker has the right relationships with blue-chip clients. For instance, a major US investment bank recently closed an USD 2 billion deal with an Indian company after conducting extensive deal sourcing efforts in India. The bank was able to get this deal through its extensive knowledge of Indian economy and its culture. It also worked with an investment banking company in India to make sure it was in good care. It is this level of knowledge and commitment to quality that makes dealing with an investment bank a valuable asset for any business.

Leave a Reply

Your email address will not be published.