How to increase your M&A transaction deal flow?
As a business leader, one of your main priorities is to generate growth. To do so, you have every interest in accessing new technologies and/or expanding internationally, notably through mergers and acquisitions. To achieve this, you need a solid and continuous pipeline of exclusive deal flow. Here are four practical tips to help you increase both the quantity and the quality of your company's deal flow.
What is deal flow in M&A?
Deal flow refers to the volume and quality of transaction opportunities — acquisitions, disposals, fundraisings — that reach a company or an investor over a given period. In mergers and acquisitions, abundant and qualified deal flow is the fuel of external growth.
We distinguish inbound deal flow, which comes to you through your reputation and network, from outbound deal flow, which you generate by going out to find targets. The most valuable is proprietary (off-market) deal flow: exclusive opportunities, before they reach the market.
5 levers to increase your deal flow
1 Tap into your personal and professional networks
Your personal and professional networks are rich sources of deal flow. If you are not already doing so, make a point of regularly contacting the members of your network (for example, by email, on social media or by phone) and keeping them informed of what is happening in your company. In addition, let them know that you are always on the lookout for merger and acquisition opportunities and that you would appreciate any leads they might have. You would be surprised how many people are willing to help you if they know what you are looking for!
2 Be active on social media platforms
Social media platforms such as LinkedIn and Twitter can be excellent sources of deal flow if used correctly. Start by following the thought leaders, commentators and journalists in your sector in order to stay up to date with the latest news and developments in your industry. Then, when you see an interesting article or post that could be relevant to your business, share it with your network along with a comment or a brief analysis of your own. Not only will this help you position yourself as a credible authority in your field, but it will also give you the opportunity to connect with potential acquirers who might be interested in what you have to say.
3 Attend relevant industry events
Another excellent way to generate deal flow is to attend relevant industry events. Not only will this give you the opportunity to meet potential acquirers face to face, but it will also allow you to stay up to date with the latest industry trends. This knowledge will be useful to you when you evaluate potential acquisition targets. When choosing the events you want to attend, consider the size, importance and purpose of the event. Smaller, more intimate gatherings generally lead to more productive conversations than large trade shows or conferences.
4 Hire a business development manager
If your company is serious about generating exclusive deal flow, you should consider hiring a business development manager whose sole responsibility is to identify and research acquisition opportunities. The best business development executives are generally very well-informed people with extensive experience in their industry. They also tend to be ambitious and self-reliant individuals who are comfortable taking initiative and working independently. If you do not have the budget to hire a full-time business development manager, you may consider engaging a consultant or a firm on a flat-fee basis.
5 Use your digital investment bank
Finally, the most effective way to find merger and acquisition opportunities is to leverage AI to map all relevant targets. The algorithms of Collaboration Capital allow you to discover all the target companies in the world that match your criteria. Then, by contacting the validated targets, you connect with executives interested in selling their company. Depending on the activities and sizes, between 10 and 40% of executives are interested in selling their company. Moreover, by contacting them directly, you access off-market opportunities: the targets have not yet started looking for buyers, and you are the first to have the information.
Qualifying and measuring your deal flow
Generating volume is not enough: a high-performing deal flow has to be managed. Define clear qualification criteria (sector, size, geography, profitability) to prioritise opportunities, and centralise them in a dedicated pipeline or CRM in order to track each target, from first contact to letter of intent.
Then monitor a few simple indicators: number of qualified opportunities per month, response rate of approached targets, conversion rate into advanced discussions and average time to closing. These metrics reveal where your pipeline leaks and where to focus your sourcing efforts.
In conclusion
A clean deal flow is essential for all CEOs who want to grow externally to create value through mergers and acquisitions. By following these five practical tips, you can ensure that your company has a continuous pipeline of high-quality acquisition and disposal opportunities.
Frequently asked questions about deal flow
What is deal flow in mergers and acquisitions?
It is the flow of transaction opportunities (acquisitions, disposals) that reach a company or an investor. Its quantity and, above all, its quality determine the ability to carry out external growth deals.
How do you generate proprietary (off-market) deal flow?
By going directly after targets before they reach the market: active sourcing through your network, targeted outreach and AI-based target mapping. This gives you access to exclusive opportunities, without competition.
How many opportunities are needed to close an acquisition?
The ratio varies by sector, but it generally takes several dozen approached targets to complete a deal. Hence the importance of a large, well-qualified pipeline rather than a few isolated leads.
Can AI improve deal flow?
Yes: artificial intelligence maps all the targets matching your criteria, on a global scale, and enables direct contact. It speeds up sourcing and opens access to off-market opportunities.
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