5-Step Blueprint to Take Control of Deal Flow

Once upon a time, private equity and investment banking firms relied largely on networking and intermediaries to find and close deals. And it worked. But today’s dealmakers find themselves in a changed world — one that requires them to reinvent how they source andtransact, or else get left behind by the competition.

 Record-breaking dry powder chasing deals. New Businesses that can emerge and grow with less capital than ever before.Increased pressures to deliver better terms, deeper expertise, and outsized returns. These are just a few of the challenges modern dealmakers are up against.

 More firms are realizing their traditional approaches no longer provide adequate deal flow, and they must also develop a direct sourcing motion. But they’re stuck relying on bottoms-up, brute-force approaches to discover and research non-transacted companies.

 In contrast, new school dealmakers are harnessing data, technology, people, and processes to take a structured, accelerated, and data-driven approach to finding and closing deals — and they’re rising to the top. Our research shows that new school dealmakers transact 55% more and generate 8.3% points higher internal rates of return (IRR) compared to their peers.

 The bottom line: Traditional dealmaking tactics simply aren’t as effective as they used to be. Reinventing is no longer optional, and new school firms are following this 5-step blueprint to make it happen:

Step #1: Replace Shoe-Leather Tactics with Data Signals

Rather than painstakingly panning Google for nuggets of information about bootstrapped companies, modern firms are leveraging new services that shed light on this traditionally opaque market segment. They focus on 9 core data signals that not only serve as key indicators around investment readiness and potential, but also help refine investment theses and develop proprietary scoring methodologies.

Step #2: Start Direct Sourcing

New school dealmakers are modeling their direct sourcing efforts after outbound technology sales. With so much data at their fingertips, these business development teams are able to clearly identify the attributes that make up their highest value opportunities, or ideal customer profiles (ICPs). They then develop a corresponding lead scoring model that allows them to effectively rank prospects and prioritize them for further research and engagement.

Step #3: Develop New Competencies

Leveraging the latest data and tools requiresnew school firms to develop new competencies around technology, development,and operations. This means adding new functions that feature a number of specialized roles with clearly defined responsibilities, such as IT, sales operations, and data analyst professionals.

Step #4: Build the Right TechStack

Traditional dealmakers are slow to adopt new technology. But new school firms proactively select, deploy, and integrate an advanced ecosystem of solutions and applications — or tech stack — to help scale and accelerate deal flow. While every firm’s tech stack is purpose-built and unique, there are 4 core components every deal maker needs to more efficiently understand, engage, and acquire prospects.

Step #5: Adopt Agile Processes

Thriving in today’s fast-paced and volatile market requires firms to constantly evaluate their performance and strategies.Adapted from a popular software development methodology, Agile enables dealmakers to quickly respond to new opportunities, identify threats, and improve theses in real time. Rather than following traditional top-down directives, everyone in the organization is expected to contribute and use data to guide their work.

Get the Free Playbook

The data is clear: Firms that fail to embrace modern technology, data, and processes are at a disadvantage. But following these five steps is a surefire way to outpace the competition and lead the pack for years to come.

If you’re interested in learning more about new school dealmaking and how to implement each of these five steps, download our free guide, Take Control of Your Deal Flow: A 5-Step Playbook for Modern Private Equity and Investment Banking Firms.

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Sourcing & Origination
Investment Banking
Private Equity
Venture Capital
Posted
August 3, 2021
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