Like “Chief Inspiration Officer” or “Brand Evangelist” (ugh), “deal origination” is a kinda puffed-up title for a real boots-on-the-ground task – the seed, the starting line, the first crucial step in any deal pipeline. Less pretentiously known as deal sourcing, the job is just that: scouting out the investment opportunities that make the M&A world go round.
So whether you’re a Managing Director, VP, VC, investment banker, or just a natural-born dealmaker, we’ve got a VDR server’s worth of the hard and soft skills that’ll make you the next closer spoken of in legend (or at least on your company’s Slack).
Table of Contents
ToggleUse What You’ve Got
Deal origination is often all about expanding your network, leveraging everything from social media outreach to AI-driven deal-sourcing platforms. So, this may sound a little contrarian but hear us out: before you let Skynet source your deals, start with what’s in front of you.
The network of contacts you already have might just be your best bet for new opportunities. And that’s because you’ve already established those relationships and you’ve already put yourself in a position of being able to soak up information socially, which means you’ve already done the footwork of getting those leads nice and warmed up. So start there before you stretch out.
Leave the Laptop
Excuse us while we go a little ‘OK boomer’ on you. If you want to be a better dealmaker, sometimes, it all starts with leaving the house…or your office. Yeah, we know we just extolled the virtues of inbound deal sourcing, but you need outbound sourcing too. It’s called diversification, Gary.
We’re not saying “hiT tHE pAveMENt and gO HAnd oUt reSuMeS.” We’re just saying that conferences, trade shows, incubators, and seminars are like startup Burning Man. If you want to make inroads with the best, brightest, most promising startups out there, you’ve got to go to the places where they’re vibing. And the best part is, you don’t even have to get stuck in the desert with a baggie full of shrooms and no gas.
Track Those Triggers
Call ‘em trigger events or deal signals, you need to look for signs that targets are ready to roll the dice on something different – because that’s when MVP dealmakers swoop in. For superhuman deal origination, let data points like these signal that it’s time to make your move. Some surefire green flags for investment readiness might include:
- Exec leadership nearing retirement age, or new hires at the top
- Trending consolidation in the company’s sector
- Startups with a significant gap in fundraising after the initial round
- Companies selling subsidiaries
Don’t Fear a Little Help
Sure, some firms use in-house deal-sourcing teams, and that’s great. Maybe you’re even part of that team, and maybe you’ve got lots of pride. Your deal doesn’t care. Beyond these walls lie verdant fields of deal-sourcing specialists with vast scores of knowledge and perspectives so different from yours, it’s almost like they’re coming from different brains (they are). And they’re just waiting to be contracted, so do that.
Guess what doesn’t really factor into the deal pipeline? Pride. Unless it’s June, but that’s a different kind of pride.
Embrace the Mailing List
OK, no one likes a mailing list. That’s true, but it’s also because 99.9% of mailing lists are perpetual ad bombardments for activities that aren’t remotely done in perpetuity. Like, you don’t need a bi-weekly email from Casper about buying a new mattress.
But it doesn’t take an ace managing director to know that deal origination is happening in perpetuity, and that’s exactly why a mailing list can actually be useful here. If you find yourself list-less at the beginning of your journey, don’t sweat it – as the pros at M&A Science recommend, “a paid list can be a good investment if you are just starting. Industry-associated lists are another excellent source of potential targets [and] salespeople who are at the front lines are also a great source of potential targets.”
Find Your Inner Dealmaker
It’s easy to fall into the trap of thinking that all of the best dealmakers fall onto one side of a binary personality profile. They’re either the flashy, old-school sales-sales-sales extroverts (with a new post-crypto bro sheen) or they’re the stoic, dry-to-the-point of intimidation introverts who get the deal done with no frills.
But there’s a third type that doesn’t fall into these dated, narrow categories: you. Because a successful deal pipeline isn’t about personality types, it’s not about flash or street cred or mind games. It’s about putting the work in, and that work is powered by a diverse synthesis of sourcing strategies.
As SourceScrub reminds us, about 1,000 investment opportunities cross your metaphorical desk every year. Roughly 250 of those are discussed with your investment committees, 30 make it to the final investment stage, and 10 are completed. The odds are so small, persistence becomes an absolute necessity.
But when you start with a bigger pool of opportunities, that final number gets a little more encouraging. Deal origination is what makes that pool bigger, and you can’t just dip your toes into it – you gotta cannonball in like summer’s over and the pool closes tomorrow, every time.
Dan is a freelance writer with over a decade of experience, currently residing in Dallas, TX. Along the way, he’s been lucky enough to collaborate with brands including Fortune, The Motley Fool, Office Depot, MSN Money, and many more.
Sources
CFI – Deal Origination
Affinity – The Ultimate Guide to Deal Origination
DealRoom – A Beginner’s Guide to M&A Deal Origination
SourceScrub – Top M&A Deal Sourcing Strategies
Galaxy – 9 Tips for Deal Sourcing That Actually Work in 2023