What Does Deal Flow Mean?
Deal flow is a qualitative measure of the rate at which M&A professionals receive business potential deals. In other words, deal flow refers to the gamut of offers and opportunities received by a firm.
A deal currently on the table always is the top priority, but it's the nature of the business for any advisor to be on the lookout for their current pipeline. It's most common for deal flow to come from referrals from other professionals, such as attorneys and accountants, and there may or may not be a fee for making an introduction.
Divestopedia Explains Deal Flow
Deal flow is the lifeblood of any M&A advisor or private equity firm. It doesn't matter if you refer to the buy-side or the sell-side, everybody wants more "flow."
From a business owner's perspective, deal flow is important for a number of reasons. First, the ideal firm is one that is competent and thriving, but not overwhelmed with work. Think of it as the Goldilocks selection process -- you want a firm that isn't too hot, isn't too cold, but has just enough time to devote to your process. Second, it's key to build relationships earlier rather than later. Managing your team is a big part of a sales process, and the more you are able to get to know your advisors and verify that there is the right fit between your organizations, the easier the process will be.
Finally, understanding flow can sometimes give you a leg up in negotiations. A private equity firm with a new fund that needs to be spent and that is low on deal flow might be more aggressive in getting a deal done. In the same light, an investment banker who has a full slate of deals might not be as willing to be flexible on his/her fees.