Deal Origination

Deal origination is the active process by which investors and advisors find and approach transaction opportunities, ideally before a company is formally for sale. It covers database and registry screening, thematic sector theses, direct outreach to owners, intermediary networks and automated sourcing. The goal is proprietary situations without a competitive auction, because these lower the entry price and leave more time for diligence and structuring. The economic leverage is substantial, since an entry one or two turns of multiple lower works across the entire holding period and is hard to recover through operational measures.

Methodologically, good origination starts from a clear thesis on sector, size segment and business model, from which a structured target list is built. Only then does outreach follow, which as a rule requires several contacts over a longer period, because an owner is rarely ready to sell at the moment of first contact. Origination is the activity, deal flow the result: reacting only to inbound sale processes gives you deal flow but is not origination. In the German Mittelstand it is particularly demanding, because many owners do not make their exit intentions public. Publicly visible sale opportunities therefore cover only part of the addressable market.

For funds, proprietary origination is therefore a genuine point of differentiation. Organisationally, outreach in funds is often run by a dedicated team segmented by sector or region that maintains contacts over years, because first contact and willingness to sell are frequently several years apart. The work is measured by the number of companies approached, the response rate, the number of conversations held and the transactions arising from them, with conversion from first contact to completion depending heavily on the target group, quality of outreach and observation period. Without measuring that rate, the effort spent on outreach cannot be managed sensibly.