Deal Sourcing
Definition
The process by which private equity and venture capital firms identify, evaluate, and originate potential investment opportunities. Effective deal sourcing increasingly relies on proprietary data, network effects, and reputation — all intangible assets that distinguish top-performing funds.
Complementary Terms
Concepts that frequently appear alongside Deal Sourcing in practice.
A private equity transaction in which two or more PE firms jointly acquire a target company, sharing the equity investment, risk, and governance responsibilities. Club deals enable firms to pursue larger transactions than they could finance individually and provide portfolio diversification benefits.
The configuration of financial, legal, and operational terms governing a merger, acquisition, or investment transaction. Deal structure encompasses the mix of cash and equity consideration, earn-out arrangements, escrow provisions, representations and warranties, indemnification mechanisms, and governance rights.
A separate legal entity created for a specific financial purpose, such as isolating risk, holding assets, or facilitating a particular investment. SPVs are commonly used in venture capital for individual deal syndication and in private equity for structuring leveraged acquisitions.
An investor in a private equity or venture capital fund who contributes capital but does not participate in day-to-day investment management. LPs include pension funds, endowments, family offices, sovereign wealth funds, and high-net-worth individuals.
An economic model built around digital platforms that create value by facilitating exchanges between two or more user groups. Platform businesses derive the majority of their enterprise value from intangible assets including network effects, proprietary algorithms, user data, and brand trust.
The annualised rate of return at which the net present value of all cash flows from an investment equals zero. IRR is the standard performance metric for private equity and venture capital funds, allowing comparison across investments with different holding periods and cash flow profiles.
An investment vehicle that allocates capital to a portfolio of private equity, venture capital, or hedge fund managers rather than investing directly in companies. Fund of funds provide diversification across managers, strategies, and vintages, though they involve an additional layer of management fees and carried interest.
The practice of comparing a company's performance metrics, processes, or practices against industry leaders or best-in-class peers. Benchmarking against productivity and intangible asset data helps firms identify gaps and prioritise investment.
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