Investment banking, or A Deal Origination is the primary source of revenue for most investment firms. The success of a company depends on its ability to keep a steady flow of solid investment opportunities.
Decades ago, a firm’s investment and acquisition process began with members building relationships with individuals and companies within their local markets through personal connections, using Rolodexes at golf tournaments and lunch meetings, or attending industry events to meet business owners who might be interested in selling. Today, a company’s successful M&A process begins much earlier and has a more global focus, due to advances in technology and data analytics, as well as specially-designed digital tools.
M&A firm the executives and their team’s main job is to spot companies that are likely to be attractive for a sale in the market and present these to business owners. If the owner decides to take up the offer and the investment banker gets the authority to provide advice on the deal and earn a commission if they are successful in closing the deal.
Investment banks can manage their deal sourcing internally or outsource the role to intermediaries that are experts in a specific market or industry. The intermediaries scan opportunities, initiate initial communication with business owners, and can advance the transaction process by handling paperwork and providing market information. While it is a valuable tool it can be time-consuming for investment banks to continually look through and filter opportunities and rely on intermediaries that might not always have up-to-date, accurate business information.