Deal Origination
Definition
Deal origination is the process of finding and initiating acquisition opportunities. For an operator or investor growing by acquisition, it covers defining the acquisition criteria, building and working a pipeline of potential targets, and opening conversations with owners — whether through intermediaries such as brokers and corporate finance advisers, or directly and off-market. Origination is a numbers game refined by focus: strong acquirers screen many businesses to complete a few, and they invest in relationships and reputation so that owners and advisers bring deals to them. Proprietary origination — reaching owners before a business is openly marketed — tends to produce better prices and less competition than bidding in an auction. A structured view of what makes a target valuable, including its intangible assets, helps an acquirer spot businesses whose worth their accounts understate.
Complementary Terms
Concepts that frequently appear alongside Deal Origination in practice.
Proprietary deal flow is a stream of acquisition opportunities an acquirer reaches before they are openly marketed to the wider buyer universe. Instead of competing in an auction run by a seller's adviser, an acquirer with proprietary deal flow approaches owners directly, or is approached first, because of its reputation, relationships and focus in a sector.
The buyer universe is the full set of parties who might realistically acquire a particular business. It is usually grouped into trade buyers — competitors, suppliers, customers or adjacent companies that gain strategic value from the acquisition — and financial buyers such as private equity firms, search funds and other investors that buy for a return.
A private equity value creation approach in which a fund acquires a platform company and subsequently makes multiple add-on acquisitions to accelerate growth, expand market share, and create a business of greater scale and value than the sum of its parts. The strategy generates returns through operational improvement of the platform, multiple arbitrage (acquiring at lower multiples than the eventual exit multiple), and synergy realisation from integration.
The required accounting method for business combinations under IFRS 3 and ASC 805, which involves identifying the acquirer, determining the acquisition date, recognising and measuring the identifiable assets acquired and liabilities assumed at fair value, and recognising goodwill or a gain from a bargain purchase. The acquisition method replaced the previously permitted pooling of interests method and ensures that all identifiable intangible assets are separately recognised at fair value on the acquirer's balance sheet.
Further Reading
How to Find a Business to Buy: Deal Origination
The full origination process for operators.
Read more →Related FAQ
Define your acquisition thesis, build a target list, approach owners, agree heads of terms, run due diligence, finance and structure the deal, then complete and integrate it with a 100-day plan.
Read full answer →How do I find a business to buy?
Define clear acquisition criteria, then source targets through brokers and advisers and, ideally, direct off-market outreach that builds proprietary deal flow so you are not just bidding in competitive auctions.
Read full answer →Put this knowledge to work
Use Opagio's free tools to measure and grow the intangible assets that drive your business value.