Deal Origination in 2021: Data Best Practices for Fueling the Pipeline and Beating the Competition

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Why deal origination data will become more important than ever over the next 12 months

 

What besides deal origination and new business development is top of mind for private capital investors as we enter the new year? According to a recent survey by Lincoln International, 88% of private equity investors indicate their most important 2021 objective is deploying capital – a nearly ten-point increase from 2020.

 

Josh Giglio, Vice President of Customer Success at SourceScrub, cited this forward-looking factor to start his conversation with Emanuel Mesa, Solutions Architect at DealCloud, during the webinar, “Leading Strategies for Kick-Starting M&A Deal Origination.” SourceScrub is a leading intelligence platform built for investment professionals by investment professionals.

 

In order to effectively deploy capital in the coming year, Giglio advised firms to strongly consider new data solutions for deal origination. In an increasingly competitive asset class, the utilization of cutting-edge technology and data is critical, and Giglio provided another survey to demonstrate its efficacy: By matching PitchBook return data with SourceScrub internal data, a correlation shows that firms with a sophisticated technology stack produce an additional 920 basis points, or $111B in overall returns (against $1.2T in dry powder), compared to firms which don’t utilize technology in their sourcing.

 

Further, there is still a relative first-mover advantage, as 65 percent of private equity firms currently do not use technology systems for sourcing or tracking deal flow, and many others only use marketing technology (based on a survey of 3,000 private equity firms). If 2021 is the year of putting capital to work, then the implementation of new data systems is crucial for firms’ success.

 

Below, deal origination experts outline three core strategies for kick-starting deal flow:

  • Ensure Efficiency In Your Pipeline: The current data entry process used by most firms is outdated and cumbersome. Time spent on data input adds up, and ultimately hours upon hours are wasted through this manual process – time that could and should be spent on sourcing and origination efforts.
  • Maximize Accessibility: A data platform is most useful if the full team is able to access and share information seamlessly. Through DealCloud and SourceScrub, all team members can view holistic data sets, and every professional will know which of their colleagues are leading on specific accounts – allowing appropriate dialogues and hand-offs to take place. Deal progress then becomes a frictionless process, and all information is available to the right parties.
  • Maintain Accurate Data: The integration of DealCloud and SourceScrub ensures that all data is accurate and up to date. If any changes occur within a target company, in its sector, or within a variety of outside factors that might impact the company, the data is automatically updated, and deal teams have a clear view of the company’s current positioning.

 

“It’s about filtering out the noise and focusing your time on identifying the opportunities.”
– Josh Giglio

 

The integration of DealCloud and SourceScrub has created a two-way communication system that maximizes the usability of both platforms for the end user, and empowers the user to make decisions based on a wholesome understanding of data. The data “push back-and-forth” between the two entities allows private equity firms to manipulate data displays in the most effective way possible for their investment thesis. Users can filter their searches by company type, ownership type, total funding, number of existing funding rounds, specialties, geography, and more. By simply entering a company name into SourceScrub’s platform, all relevant information is provided on the DealCloud dashboard – interconnecting the platforms and creating a value-add and efficiency play for dealmakers.

 

Given the vast amount of deal origination data that is pulled in by SourceScrub, users are able to determine which datasets are most important to them based on their own experiences. As Giglio noted: “It shows which companies are likely targets; it helps you to overturn the right rocks.” In the competitive year ahead, identifying your targets and the speed in which you can execute on your pipeline will be essential.

“It’s artificial intelligence at your fingertips”
– Emanuel Mesa

 

The tech-powered capabilities of SourceScrub act as a build out of your team because the platform continually adjusts and adapts to imperfect information throughout the private capital world. Data is auto-corrected and wrong user inputs – such as an incorrect company name – are recognized and adjusted so there are not missed opportunities.

 

Now is the time to revolutionize your approach to sourcing. As the new year approaches, ensure your M&A deal origination strategy is efficient, accessible, and accurate. To learn more, contact us today for a consultation.

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Author:

Emanuel Mesa

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