What Does Deal Sourcing Mean?
Deal sourcing refers to the process through which financiers such as investment bankers, private equity firms, family offices, business owners, strategic buyers and advisors are able to discover, evaluate and potentially select various business opportunities including sell-side listings and buy-side mandates.
Divestopedia Explains Deal Sourcing
An effective deal sourcing process is fundamental to successful investing. Deal sourcing involves generating leads and managing relationships with intermediaries. Strategies for deal sourcing vary among firms. Some firms prefer to employ specialist teams while others prefer using in-house resources. Ultimately, origination hinges on having a broad network of contacts and a good reputation, which can often be accessed through an online platform. Origination is done by either gaining knowledge of deals in the market so that a bid can be placed, or by creating a deal for themselves through their connections with one of the parties involved. Both buy- and sell-side opportunities are sourced.
A vast majority of deals are now auctioned because of increased competition for deals alongside increased sophistication of vendors, particularly in the middle market. The parties use technology and media to network and, even where opportunities are initially originated by a private equity firm, the vendors try to market the deal more widely to other qualified prospective buyers.