Where does the deal flow come from?
PE folk, does most of your deal flow come from Investment Bank mandated sales? If so, how many CIMs do you get sent a week? How do you guys handle going thru all those decks and make educated decisions on go or no go?
On another note, if all your deal flow is sent from i-banks, then would it make sense for PE as a whole to start moving down market to smaller more growthy / emerging company deals? Assuming you could "network" with founders and VC owners to bypass the Investment Banking lead auction?
I'm just blurting out a stream of consciousness here because I've been involved on the sell side on a couple projects where we had multiple bidders (strategic and financial) and off the bat, we knew we were going to go with the strategic, but strung the fin sponsor along just in case. Didn't exactly sit right with me but as a hopeful PE professional I'm just wondering about ways to think/combat this.
My understanding is that the size of business above which deals are intermediated via third party is increasing.
That is, proprietary deals are harder to find unless the fund size is really small.
Having said that, larger funds have developed strategies to find angles in competitive processes. Though, if they are deluding themselves then they won’t realise they are being strung along like you said.
Adjusting the size of an existing fund down in size is difficult due to cost base of employees etc. But one of the reasons you see spin outs from these larger funds raising a smaller fund is to secure more proprietary deal flow.
Solid response, thanks.
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