Deal sourcing – also known as deal origination – is a term commonly used in the world of private equity and venture capital to refer to the process of searching for new opportunities for investment.
When done correctly, deal sourcing can help you build up an impressive investment portfolio or allow you to find an exciting M&A prospect that can help you expand your market position or even enter a brand-new market.
In this concise guide, we’ll take a deep dive into the fascinating (and, potentially, financially rewarding) world of deal sourcing and discover:
- How it works
- Tried-and-tested deal sourcing strategies
- How technology can help
Hopefully, by the end of the article, you will walk away with a greater understanding of what deal sourcing is, how it works, and how you can use it to your advantage.
How deal sourcing works
Deal sourcing is a process that can take one of two forms, depending on the size of your business and whether you can afford to hire an intermediary.
Smaller businesses may have to engage in deal sourcing themselves, which involves seeking out other businesses that may be interested in a potential M&A deal. This can be done by drawing on industry contacts who can provide some potential targets, or by attending industry events like trade shows and conferences and scouting out possible prospects in person.
The second option is to go through an intermediary – in the M&A world, this would be a business broker, such as Harris Acquire – who can deal source on your behalf and orchestrate the entire process from start to finish.
This is an ideal option for businesses that have enough funds to hire an intermediary and takes the hassle of hunting for potential deals off your shoulders so you can focus on running your company.
Deal sourcing strategies and techniques
There are all kinds of time-honoured strategies and techniques you can use to deal source. Which methods you opt to employ will depend on your unique resources and the objectives you want to achieve.
The Networking Route
Networking and focussing on honing strong relationships within your industry can be a very effective way to deal source, especially if you don’t have the budget to take on an intermediary.
The best ways to network are, of course, at dedicated networking events, as well as conferences and trade shows. However, you can also arrange one-on-one meetings with any parties you think may have an interest in doing a deal, and you can also draw upon your friends in the industry to come up with some potential targets on your behalf.
Hire a Broker
A highly effective deal sourcing strategy to consider is the hiring of a reputable business broker. After all, their expertise lies in helping buyers and sellers find the best deals, and they will already have a network of possible targets in place whom they can contact on your behalf.
What’s more, a business broker can offer a comprehensive service that goes far beyond the initial deal sourcing. They can assist you with every step of the journey from initial contact to due diligence, negotiation, and completion.
Reaching Out Directly
While both networking and hiring a broker can be viewed as ‘indirect’ forms of deal sourcing, you can also opt to reach out directly to any companies you think may be interested in a deal.
You can do this by contacting them and arranging to make an appointment with the company’s executives, or you can target a whole bundle of ‘possibles’ in one fell swoop by sending out emails to a pre-prepared mailing list.
How technology enhances deal sourcing
As you can imagine, technological innovations have had a big impact on the world of deal sourcing and lend themselves very well to a variety of deal sourcing strategies. Here are some technological methods you can employ to help you scout out the perfect target for your proposed deal.
- Use a dedicated platform
These days, there is a plethora of tried-and-tested deal sourcing platforms you can try, each one with its own unique pros, cons, and specialisations.
For instance, Dealsuite specialises in cross-border M&A with a strong European focus while Grata is an AI-powered platform that provides access to private companies that may otherwise be hard to find.
It’s a good idea to research the different platforms and their strengths and weaknesses to help you find the best option for your needs.
- Boost your online presence
One of the best ways to indirectly deal source using technology is to work on enhancing your online presence. Any brand with a strong online presence is bound to attract more potential investors – not to mention customers! Make sure you have a high-quality, up-to-date website, that you post regularly on LinkedIn, and maybe even consider branching out into video content or podcasts.
- Use social and content marketing tactics
Another way to reach out to possible targets and boost your online profile is to use both social media and content marketing. Having a robust social media presence is ideal for outreach and forming contacts with potential investors, while content marketing can be used effectively to establish your profile as an authority in your market.
The bottom line
As you can see, there are several techniques and strategies you can employ to help you find the best deal for your business, whether you’re buying, selling, or contemplating a merger.
Of course, if you would rather focus on running your business and would like to leave the deal sourcing to the experts, here at Harris Acquire we are happy to help. We assist buyers and sellers from a wide variety of markets to locate the perfect deal for their requirements and we accompany you through every step of the journey, from initial contact to negotiations and completion.
If you would like us to help you buy or sell your business and make a deal that’s right for you, don’t hesitate to call us on 01926 757100 or send an email to Hello@harrisacquire.com.