Deal sourcing software has emerged as a powerful tool for private equity (PE) firms and investment banks (IBs) to uncover potential targets. In this article, we'll explore key features and provide valuable insights for PE firms and IBs looking to invest in a deal sourcing tool.

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What is a deal sourcing platform?

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Deal sourcing platform is a specialized software designed to support private equity firms and investment banks in identifying viable investment prospects. Deal sourcing software accelerates the process of seeking out and evaluating prospective targets that align with the investor's criteria.

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A PE firm can use deal sourcing software to identify potential companies that are for example undervalued or underperforming. The software helps streamline the search for potential targets that align with their investment strategies. AI based deal sourcing platforms such as Inven will give a list of relevant targets based on similar companies PEs have invested in before.

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Investment banks, on the other hand, can leverage deal sourcing software to identify companies seeking to raise capital or be acquired. The platforms allow IBs to connect with potential clients and facilitate deals more efficiently for their clients. AI solutions reduce manual desktop hours and allow IBs to find better leads in any niche.

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What is more, Both PE firms and IBs also benefit from deal sourcing software by tracking industry trends and networking with other professionals in their field. DSPs enable keeping up to date on market changes and new companies. The platforms also support connecting within the finance industry, allowing M&A professionals to find the contact information of potential partners and clients.

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Benefits of using deal sourcing software

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There are multiple significant benefits from using deal sourcing software. First, it likely results in access to more potential acquisition targets with increased efficiency. Deal sourcing software automates the process of identifying potential targets, reducing the time spent scrolling through companies’ websites.

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Second, deal sourcing platforms provide access to comprehensive data. This means rich data points from the identified companies with one glance. Once DSP has run the search according to desired parameters, it combines a list of companies with headcount, ownership structure, and contact details available at one glance. 

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Third, the platforms have a different reach and scope, spanning various industries and nation-wide or global markets. All the data derived from DSP searches ensures IBs and PEs have a larger pool of good targets to begin the acquisition process with. This will expand the scope of potential investments and eventually make due diligence faster as well.

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Key features to look for in deal sourcing software

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There are a few features that separate the good and average deal sourcing software. It is reasoned to take a look at these aspects before making the decision: 

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  • Number of companies: Consider the number of companies listed on the platform and their global presence to ensure a diverse array of investment opportunities.
  • Market diversity: Ensure the software caters to middle market and lower middle market companies, aligning with your investment scope. 
  • Scope of the data: Look for a platform offering a wide array of data points, from financials to ownership and contact information. Good platforms match comprehensive company profiles with similar companies to map out their competitors and detect equally promising acquisition opportunities. ‍
  • Contact Information: What type of contact data does the platform include? Reliable access to all of the key decision-makers’ contact data makes the difference.

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Other considerations

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  • Cost and Benefits: Factor in the cost of the software in relation to its features and benefits, keeping in mind the potential return on investment. How much is the added value from analysts' better time allocation?
  • Advanced Features: Look for features that best suit your specific workflow. Does it have features that other softwares don’t have? How much manual efforts are saved?‍
  • Level of Customer Support: A platform supported with reliable customer service can address any issues or questions that may arise. Does the platform have a chatbot or professionals at the other end of the line?

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Conclusion

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A great deal sourcing software supports M&A professionals to detect more deals through uncovering hidden gems. They cover more markets with greater accuracy than manual desktop search and save weeks of analysts’ time.

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There are many different deal sourcing solutions on the market, so it's important to consider your needs and requirements. The platform's features, market scope and cost-effectiveness all play a role in the final decision. Comparison will help you choose a platform that doesn’t leave any area uncovered.

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Investing in the right deal sourcing software can be a game-changer for PE firms and IBs. The more stable deal flow helps IBs and PEs to close more deals, ultimately achieving greater financial success.

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