Deal Origination in Investment Banking

Deal origination is the process of finding opportunities for investment for enterprises, private equity and venture capital firms, or other financial players. Deal origination involves spotting potential investments and pitching directly to clients, or negotiating deals as an intermediary in a transaction.

Traditional deal sourcing is based on connections to the corporate world and networking. Companies seeking to raise money or buy companies rely on these sources to get information about the market. This method is time-consuming and requires access to businesspeople who are likely to be part of the company’s network, as well as a relationship with an intermediary for investment.

A larger investment bank might have an in-house deal sourcing group that is comprised of finance professionals who work full-time in generating leads and developing a pipeline of investments for their firm. The success of this strategy depends on the reputation as well as performance capabilities of these professionals which is why it’s better appropriate for established investment firms with a track record of completing successful deals in their portfolios.

It is essential that investment banks find new deals and maintain an active M&A portfolio. However it can be challenging to digital data room accomplish this without the appropriate tools and technology. Financial technology companies have developed platforms that enable finance professionals and investors to find and find deal opportunities with automation. These platforms are able to filter inbound and outbound leads based on defined criteria like size of the transaction, industry and location, and can reduce the amount of time spent looking for opportunities on the internet.

A few of these platform providers also provide services to smaller groups that don’t have the financial resources to build their own origination teams. CAPTARGET, for example, is a company that offers a fee model that helps small brokerage firms and investment banks source deals. These services can help you save money and get more leads by giving you access to an extensive database.

Aside from these technological solutions, investment banks also have other options to source deals. They could, for instance send the details of their monthly buy-side and sale-side mandates out to potential clients. They can also spot potential investment opportunities on the market and then present them to clients, earning commissions when the transaction is completed. This is a risky and lengthy process however it could be effective in the event that the investment banker has the right connections with blue-chip clients. A major US investment bank recently completed an agreement worth USD 2 billion with an Indian company, after extensive deal-sourcing in India. The bank was able to complete the deal thanks to its deep understanding of the Indian economy and its culture. It also worked with a local investment banking firm to ensure it was in good hands. It is this level of expertise and commitment to quality that makes dealing with an investment bank an asset to any business.