Deal Origination: How PE firms can graduate from the real estate model and into the 21st century

Private equity firms excel at raising capital, but deploying capital efficiently remains a challenge for deal origination. Dry powder (amount of committed capital not yet invested) reached a record $2.6 trillion in 2024.

For starters, there’s more money looking for a home than good companies to invest it in. But also, finding good companies willing to sell is hard, even when you know an industry intimately. 

Traditional deal sourcing methods are outdated. Many private equity firms are not much further along than real estate agents dropping flyers in mailboxes, hoping the owner wants to sell their house. Or being one of many potential buyers receiving an information memorandum from a sell-side banker, which leads to competitive bidding situations where multiple firms vie for the same deal, driving up prices and reducing potential returns.

The New Paradigm – Personalized Outreach at Scale for Deal Origination

The process of M&A outreach is evolving. It is increasingly driven by automation and AI-powered systems that scan vast amounts of data to identify potential targets and initiate personalized outreach at scale.

This isn’t a futuristic concept – it’s happening now, and combines content marketing with AI-driven outreach. At a high level, the process looks like this:

Tools and Technologies for Deal Origination:

Step 1: Identify potential targets – Use tools like CBInsight or Apollo to identify potential acquisition targets, using extensive filtering criteria.

Step 2: Build your market Intelligence: Utilize tools like SourceScrub to gather comprehensive market intelligence and insights, helping to refine your target list.

Step 3: Identify company leaders: Use tools like LinkedIn Sales Navigator to identify the leaders of these companies. 

Step 4: Enrich your data: Use tools like Apollo or Clay to enrich the data in your possession on company leaders e.g. their email address and mobile phone number. Equally, information on the founders, their age, how far they are from retiring, etc.

Step 5: Develop icebreakers: Use large language models like ChatGPT or Claude to craft personalized messages that resonate with potential targets’ company leaders. 

Step 6: Connect to company leaders: Use tools like PhantomBuster to automate connection with said leaders.

Step 7: Engage with company leaders: Use tools like Lemlist or Outreach.io to develop multi-channel campaigns with complex if / then rules, to engage with company leaders. 

Step 8: Automate the campaign: Use tools like Zapier or Make to daisy chain the steps into a streamlined process.

Companies who build this capability can easily handle 30,000 to 50,000 highly targeted multi-channel touch points daily, generating consistent inbound inquiries from potential sellers. Some of these companies operate on a performance basis. Which means that the PE firms who outsource their origination to them only pay for leads.

Leveraging AI and automation for deal origination can free up scarce PE time for what really matters: nurturing those relationships and building up a portfolio of proprietary deal flow to deploy the dry powder.

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