Deal Origination and Filtering Process Deal origination is the process of identifying potential investment opportunities. This involves sourcing deals fr...
Deal origination is the process of identifying potential investment opportunities. This involves sourcing deals from various sources, including corporate mergers and acquisitions, bankruptcy auctions, industry events, and online platforms.
Deal filtering is the process of evaluating and selecting deals that meet the investment criteria of the private equity firm. This involves assessing factors such as deal size, industry, company financials, management team, competitive landscape, and potential exit strategy.
The deal origination and filtering process is crucial for private equity firms because it:
Identifies potential investment opportunities early on.
Allows the firm to build a pipeline of deals for potential exits.
Provides insights into different industries and market segments.
Helps to assess deal risk and potential returns.
Here's a simplified overview of the deal origination and filtering process:
Identify potential deal sources based on pre-defined criteria (e.g., industry, company size, financial performance).
Network with industry participants and attend relevant events.
Monitor online deal databases and research reports.
Evaluate deal terms based on investment criteria (e.g., deal size, valuation, exit strategy).
Conduct due diligence on the company, management team, and industry analysis.
Assess the deal's financial feasibility and potential return on investment.
Select deals that meet the investment criteria and demonstrate potential for success.
Negotiate key deal terms and conditions with the company.
Finalize the deal structure and documentation.
Examples of deal origination sources include:
Corporate mergers and acquisitions: Acquisition of a smaller company by a larger company.
Bankruptcy auctions: Company being sold off by a bank at a discount.
Industry events: Conferences, trade shows, and networking events where companies display their products and services.
Online platforms: Deal portals and online databases that connect deal originators with potential investors.
Examples of deal filtering criteria include:
Deal size: Minimum and maximum deal size.
Industry: Targeted industries that the firm is interested in investing in.
Company financials: Strong financial performance with a good track record of profitability.
Management team: Experienced and capable team with a proven track record of success.
Exit strategy: Clear and achievable exit strategy for the company