Investment banking, also known as Deal Origination is the main source of revenue for many investment firms. The success of a company is contingent on its ability to maintain a steady flow of solid investment opportunities.
In the past, a company’s acquisition and investment process started by building relationships between individuals and companies in their local areas, using personal connections, leveraging Rolodexes at golf games, lunch meetings, or simply attending industry conferences to find 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 advancements in technology such as data analytics, data analytics, and purpose-built digital tools.
The primary task of M&A executives and their teams is to determine companies that are likely to be appealing to buyers and offer them to business owners. Investment bankers are given an obligation if the business owner agrees to the offer, and earns a commission when they close the deal.
Investment banks can handle their deal solicitation internally or outsource the function to intermediaries who are experts in a specific market or industry. The intermediaries look for opportunities, initiate initial communication with business owners, and accelerate the process of completing transactions by processing paperwork and providing market information. While it is a valuable tool it can be time-consuming for investment banks to continually search and filter through endless opportunities and rely on intermediaries that might not always have current, accurate business information.