M&A Deal Origination For Corporate Development
Introduction
The success of any corporate development group is highly dependent on the quality and quantity of opportunities that the group is able to identify. While identifying potential acquisition targets may sound simple at first glance, creating a repeatable process can be very difficult. It requires a comprehensive understanding of your company’s strategy, as well as its capabilities, resources and growth needs. In addition, it requires an intimate understanding of the current market conditions.
Combining these factors with future market projections, trends and industry insights is what creates an effective deal origination strategy. Fortunately for those involved in corporate development efforts, there are many proven frameworks that can be adapted to fit almost any organization’s needs. Understanding the buyer’s strengths and weaknesses, in addition to their strategic goals and objectives, is critical for successfully evaluating a target for acquisition
The Art Of Deal Origination
The art of deal origination is a critical component in the corporate development process. It’s the initial identification, evaluation and pursuit of potential acquisition targets. Deal origination requires a comprehensive understanding of your company’s strategy, as well as its capabilities, resources and growth needs.
The Cornerstone Of Any Corporate Development Group Is The Ability To Continuously Uncover And Evaluate New Business Opportunities. This Specific Task, Which Is Sometimes Referred To As Deal Origination Or Transaction Origination, Is Particularly Important Because The Success Of Any Corporate Development Group Is Highly Dependent On The Quality And Quantity Of Opportunities That The Group Is Able To Identify.
It’s critical for any corporate development team to have a consistent approach for identifying new business opportunities—one that gives them access to both market intelligence and internal knowledge regarding their company’s capabilities (or lack thereof). In addition, it must also help them identify gaps in their planning process so that they can adjust accordingly based on changes in their business environment over time.
The most effective way for a company's investment bankers/corporate developers will be able to accomplish this goal involves using many different sources - including industry experts/analysts - who provide valuable insight into what's happening within various markets; competitors' moves, etc.
While Identifying Potential Acquisition Targets May Sound Simple At First Glance, Creating A Repeatable Process Can Be Very Difficult. It Requires A Comprehensive Understanding Of Your Company’s Strategy, As Well As Its Capabilities, Resources And Growth Needs. In Addition, It Requires An Intimate Understanding Of The Current Market Conditions. Combining These Factors With Future Market Projections, Trends And Industry Insights Is What Creates An Effective Deal Origination Strategy.
Fortunately For Those Involved In Corporate Development Efforts, There Are Many Proven Frameworks That Can Be Adapted To Fit Almost Any Organization’s Needs. Understanding The Buyer’s Strengths And Weaknesses, In Addition To Their Strategic Goals And Objectives, Is Critical For Successfully Evaluating A Target For Acquisition. A Holistic Approach Using Balanced Analytical Methods Will Allow Your Deal Origination Effort To Find Quality Targets That Will Further Your Corporate Development Objectives.
Fortunately for those involved in corporate development efforts, there are many proven frameworks that can be adapted to fit almost any organization’s needs. Understanding the buyer’s strengths and weaknesses, in addition to their strategic goals and objectives, is critical for successfully evaluating a target for acquisition. A holistic approach using balanced analytical methods will allow your deal origination effort to find quality targets that will further your corporate development objectives.
In order to establish the most successful framework for evaluating potential acquisitions, a thorough review of existing models must be performed. Because many of these models have been developed over decades by experienced practitioners within their respective industries, it is important not only to identify which model would best fit your needs but also how it can be tailored towards those needs.
The Market
Understanding the market opportunity and its conditions is critical to crafting an effective deal origination strategy. To begin, you should ask yourself:
What is the market opportunity?
What are the market conditions?
What are the market trends?
What is the competition?
Who are our buyers, and where are they in their buyer’s journey?
The answers to these questions will help you understand how to position your company as a solution for potential buyers.
Your Company
Before you begin to sell your company, you should be confident in the strength of your product or service. This can be done through market research and an understanding of how your product or service stands out against competitors. You should also know the strengths and weaknesses of your industry within which you operate. You’ll want to develop a strategy for growth and determine what resources are needed to achieve those goals.
Strategy
Whether you're a seasoned investor or just starting to dip your toes into the world of deal making, you need to understand the basics of strategy.
When you think about strategy, it helps to keep in mind that it's not a final plan for achieving your goal; rather, it's a plan for making choices along the way. The best strategies are flexible enough that they can adapt as circumstances change—and they may even be able to prove themselves wrong and discard bad ideas while continuing on with better ones.
Strategy isn't only useful in corporate development and investment. In fact, all professions require some sort of strategic thinking: salespeople have to figure out who their customers are and how best to reach them; marketers must decide what kind of message will resonate most with their audience; managers must determine which projects should get priority over others based on their goals for the company overall.
Identification And Prioritization Of Targets
Once you've identified the right target, how do you negotiate a good deal? And what are some of the key considerations when deciding which target to pursue?
The target selection process is both an art and a science. It involves many factors, including:
The need for your business to grow and expand its footprint into new geographic regions or markets.
The size of your existing customer base in each geographic region or market that may be interested in your products and services.
The likelihood that competitors will enter these same markets or regions at some point in time (if they haven't already).
Approach And Initial Contact
Make sure that you are talking to the right person, and not just someone who is passing through.
If a target has multiple employees, get their names first, and then look them up on LinkedIn. If they don’t have a LinkedIn profile, use Google or another search engine to find them on other social media platforms (Twitter, Facebook, etc.). You should do this as soon as possible so that they have time to check their inboxes before your call comes through.
Identify one or two core executives at each company with whom you will be able to establish rapport quickly and begin a dialogue about potential synergies between your two organizations. These executives may include founders or CEOs depending on the nature of your target company and what stage in its development cycle it happens to be at when you are initiating contact with them (e.g., early-stage startup versus later-stage startup).
Identify The Right Targets, Reach Out, Negotiate A Good Deal And Make Sure It Fits With Your Strategy.
Identify the right targets
Reach out, negotiate a good deal and make sure it fits with your strategy
The deal origination process is a critical component of any corporate development group
Conclusion
With the right approach and tools, you’ll be able to identify the right deal origination strategy for your organization. By leveraging a comprehensive understanding of your company’s strengths and weaknesses as well as its strategic goals and objectives, you can create an effective acquisition process that will help drive growth.
