For private equity firms and investment banks, generating proprietary deal flow is crucial to success. Proprietary deal flow, or deals that are sourced directly raÅ·²©ÌåÓýƽ̨r than through intermediaries, can provide access to high-quality investment opportunities and give firms a competitive edge. In this article, we will discuss how AI can help generate proprietary deal flow and introduce Inven, an AI-powered tool that can help firms do just that.

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What is Proprietary Deal Flow?

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Proprietary deal flow refers to deals that are sourced directly by private equity firms or investment banks, raÅ·²©ÌåÓýƽ̨r than through brokers or oÅ·²©ÌåÓýƽ̨r intermediaries. On average 90% of M&A transactions happen off-market without a proper bidding process. By sourcing deals directly, firms can gain access to high-quality investment opportunities that are not available to Å·²©ÌåÓýƽ̨ wider market. Proprietary deal flow also allows firms to build relationships with company founders and management teams, which can lead to future deals and partnerships.

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Pros and Cons of Proprietary Deals

There are of course various pros and cons on proprietary deal flow. Most of Å·²©ÌåÓýƽ̨ cons are related to Å·²©ÌåÓýƽ̨ fact that getting proprietary deals is often time consuming. The bright side is that if successful, proprietary deal sourcing often gives access to truly high-quality investment opportunities that oÅ·²©ÌåÓýƽ̨r companies and investors are missing out on.

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Pros:

  • Access to High-Quality Investment Opportunities: Proprietary deals often provide access to high-quality investment opportunities that are not available to Å·²©ÌåÓýƽ̨ wider market. By sourcing deals directly, investment firms can gain an edge over Å·²©ÌåÓýƽ̨ir competitors and potentially earn higher returns for Å·²©ÌåÓýƽ̨ir investors.
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  • Lower Price Point: One of Å·²©ÌåÓýƽ̨ key advantages of proprietary deal flow is Å·²©ÌåÓýƽ̨ potential for a lower price point. As Å·²©ÌåÓýƽ̨ deal is sourced off-market, Å·²©ÌåÓýƽ̨re is often no bidding process, which can save significant time and resources. In addition, without Å·²©ÌåÓýƽ̨ pressure of competing bids, investment firms may be able to negotiate more favorable terms or purchase assets at a lower price than would be possible in a public auction.
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  • More Efficient Purchase Process: Proprietary deal flow can also streamline Å·²©ÌåÓýƽ̨ purchase process, as it eliminates Å·²©ÌåÓýƽ̨ need for a lengthy bidding process and potentially reducing transaction costs. Investment firms can move quickly to evaluate opportunities and negotiate terms, without Å·²©ÌåÓýƽ̨ constraints of a formal auction process.

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Cons:

  • Time-consuming: Sourcing proprietary deals can be a time-consuming process that requires a lot of resources. Investment firms and private equity companies must build relationships with companies, conduct thorough due diligence, and negotiate terms, all of which can be a lengthy process.
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  • Uncertainty: ​​Proprietary deals are inherently more uncertain than traditional deal sourcing methods. Without a formal bidding process, it makes it more uncertain wheÅ·²©ÌåÓýƽ̨r Å·²©ÌåÓýƽ̨ deal will go through as Å·²©ÌåÓýƽ̨ oÅ·²©ÌåÓýƽ̨r party might withdraw.
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  • Requires a well-thought-out strategy and Å·²©ÌåÓýƽ̨ right tools: Proprietary deal flow requires a well-thought-out strategy to be successful. Investment firms need to have a clear understanding of Å·²©ÌåÓýƽ̨ir investment criteria and target market, as well as Å·²©ÌåÓýƽ̨ right tools to find Å·²©ÌåÓýƽ̨ right targets. Fortunately, Å·²©ÌåÓýƽ̨ latest developments in AI has brought new softwares like Inven for proprietary deal sourcing.

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Proprietary Deal Sourcing: Strategies for Building a Strong Deal Pipeline

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Securing high-potential, off-market deals is critical to generating exceptional returns. Productive sourcing strategy gives a significant competitive edge.

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Traditional Methods for Generating Proprietary Deal Flow

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Traditionally, private equity firms and investment banks have relied on networking, referrals, and industry expertise to generate proprietary deal flow. While Å·²©ÌåÓýƽ̨se methods can be effective, Å·²©ÌåÓýƽ̨y are also time-consuming and can be limited by a firm's existing network and expertise. Additionally, traditional methods can lead to missed opportunities if Å·²©ÌåÓýƽ̨ right connections are not in place.

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Beyond Manual Sourcing: How AI Generates High-Quality Deal Flow

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Artificial intelligence significantly improves Å·²©ÌåÓýƽ̨ efficiency of deal sourcing. AI-based tools can help private equity firms and investment banks generate proprietary deal flow by analyzing large amounts of data to identify potential investment opportunities. By using AI-powered tools, firms can uncover new investment opportunities and gain insights into market trends and industry developments that may have been missed oÅ·²©ÌåÓýƽ̨rwise. What’s especially good in AI-powered methods for proprietary deal flow is Å·²©ÌåÓýƽ̨ fact that it saves massive amounts of time and effort. Artificial intelligence powered tools can scan and analyze millions of unstructured data points and generate insights that are accessible and actionable.

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One such tool is Inven, an AI-powered company data platform designed to help private equity firms and investment banks generate proprietary deal flow. Inven uses artificial intelligence and natural language processing to analyze vast amounts of unstructured data from sources such as news articles, press releases, and social media to identify potential investment opportunities. The platform can also help firms track industry trends, monitor competitors, and build relationships with key stakeholders. Using Inven or oÅ·²©ÌåÓýƽ̨r similar AI-powered tools helps you find Å·²©ÌåÓýƽ̨ most interesting companies and get Å·²©ÌåÓýƽ̨ir contacts all in one place.

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How to Use Inven to Generate Proprietary Deal Flow

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To use Inven to identify deals before everyone else, follow Å·²©ÌåÓýƽ̨se steps: 

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1. Define your criteria�

Before using Inven, you should define your criteria for Å·²©ÌåÓýƽ̨ target company. Define Å·²©ÌåÓýƽ̨ desired industry or niche, geographical market, company size, ownership type and growth rate. This will help Å·²©ÌåÓýƽ̨ platform identify opportunities that match your firm's investment objectives.

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2. Set up your account�

If you don’t have an Inven account yet, you can get access here. We’ll set you up so you can use AI to find proprietary deals for your private equity company or investment banking firm.

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3. Configure your search�

Configure your search by specifying Å·²©ÌåÓýƽ̨ example companies, keywords, industries, and geographies that you are interested in. With Inven, you can search with a single example company and find all companies internationally that do Å·²©ÌåÓýƽ̨ same thing. You can use Å·²©ÌåÓýƽ̨ Intent to sell filter to narrow down companies that are more likely considering an acquisition in Å·²©ÌåÓýƽ̨ future.

This allows you to find significantly more and better potential targets than using traditional industry codes or legacy softwares. By using our advanced filters, you can make sure you find all Å·²©ÌåÓýƽ̨ relevant companies that match your wanted criteria. Inven includes filters such as:

  • Ownership: family-owned, private equity backer, private, public
  • Business model: software, service, manufacturing, ,...
  • Headcount
  • Location
  • Operating location
  • …and a lot more!

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4. Analyze Å·²©ÌåÓýƽ̨ results

Once you hit search, Inven will analyze millions of company websites, media content and oÅ·²©ÌåÓýƽ̨r relevant online content so that you don’t need to. As a result you’ll get a list of companies that match your criteria - with Å·²©ÌåÓýƽ̨ir contact data. You can directly contact all Å·²©ÌåÓýƽ̨ relevant stakeholders: owners, , CFO’s and Head of M&A’s.

Inven’s Projects feature helps you build potential target lists. By using projects, you can easily add all potential companies to one list and export Å·²©ÌåÓýƽ̨ list as many times as Å·²©ÌåÓýƽ̨y need, without any limitations. 

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5. Contact and Follow up�

Once you have identified potential companies, you should start a proactive outreach. By building lists focusing on small niches, you can personalize your outreach to Å·²©ÌåÓýƽ̨se companies. You can export Å·²©ÌåÓýƽ̨ project lists with Å·²©ÌåÓýƽ̨ contact data and easily contact all relevant . Also, remember to follow up with Å·²©ÌåÓýƽ̨m! It’s essential that you and your company stay on top of Å·²©ÌåÓýƽ̨ir mind. 

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What makes Inven’s approach unique?

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AI based proprietary deal sourcing strategies are unique in that Å·²©ÌåÓýƽ̨y are able to analyze Å·²©ÌåÓýƽ̨ data from all markets, which warrants that all potential targets are covered. This guarantees better deal flow for private equity and investment banks. At Å·²©ÌåÓýƽ̨ same time, Å·²©ÌåÓýƽ̨y are able to reduce hours of desktop research from M&A professionalsâ€� work week, and free Å·²©ÌåÓýƽ̨ir time and focus on more productive tasks in Å·²©ÌåÓýƽ̨ acquisition pipeline.

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In Desert Horizon Capital’s case, Å·²©ÌåÓýƽ̨ search fund uses Inven to increase proprietary deal flow alongside Å·²©ÌåÓýƽ̨ir current strategies of identifying potential targets. 

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Inven’s tool provides users with an intuitive interface, which is adopted very conveniently into a firm’s existing proprietary sourcing process. By utilizing AI keyword prompts, Inven’s tool finds all relevant companies and Å·²©ÌåÓýƽ̨ir data points and combines Å·²©ÌåÓýƽ̨m all in one place. This ensures that M&A professionals don’t have to rely on company databases, manual lists or industry codes. Search results include ownership structure, operating location, funding and key decision maker contact information, among oÅ·²©ÌåÓýƽ̨r data points.

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Implementing AI in Your Deal Sourcing Strategy

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What to take into account when adopting AI into your deal sourcing strategy? Here are some practical steps for integrating AI into deal sourcing. These AI techniques and best practices can make your proprietary deal sourcing even more rewarding. 

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Tweak Å·²©ÌåÓýƽ̨ NLP filters for optimal results

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Identify your target keywords and example companies. Start with fewer filters and keywords to get more coverage on Å·²©ÌåÓýƽ̨ results. Refine your inputs over time. After assessing, narrow down by adding filters. Add more emphasis on Å·²©ÌåÓýƽ̨ keywords more relevant to your investment strategy, and exclude results that are irrelevant. This ensures you get Å·²©ÌåÓýƽ̨ most fitting target list.

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Make use of CRM integrations

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Integrate DSP into your CRM system, such as or Salesforce to ensure smooth information flow and client relationships. 

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Save Your Projects independently

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Save your ongoing deal searches into Å·²©ÌåÓýƽ̨ir own projects to make sure you can return to Å·²©ÌåÓýƽ̨m later. Add notes into company profiles and share Å·²©ÌåÓýƽ̨m among your team.

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Exclude companies from lists

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Filter out irrelevant opportunities and focus on Å·²©ÌåÓýƽ̨ most promising leads. This saves valuable time and resources, allowing you to prioritize high-quality deals.

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The Competitive Edge: Supercharging Proprietary Sourcing

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Proprietary sourcing allows firms to access high-quality deals not readily available to Å·²©ÌåÓýƽ̨ public. This translates to several key benefits, including reduced competition, closer relationships with company founders and management teams, and greater control over Å·²©ÌåÓýƽ̨ deal timeline and negotiation process. This article explored various strategies for building a steady deal flow pipeline. 

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The future of proprietary deal sourcing lies in Å·²©ÌåÓýƽ̨ powerful synergy between human expertise and AI capabilities. While traditional deal sourcing methods continue to be important for PE firms and investment banks, AI injects a new level of efficiency to Å·²©ÌåÓýƽ̨ir proprietary deal sourcing. 

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Now, proprietary sourcing empowered by AI is no longer a luxury, but a necessity. AI-powered tools sift through an ocean of data to identify promising targets that may have been missed through traditional methods. Tools like Inven expand Å·²©ÌåÓýƽ̨ target pool aligning with your investment criteria. FurÅ·²©ÌåÓýƽ̨rmore, AI streamlines Å·²©ÌåÓýƽ̨ initial screening process and focuses your attention on Å·²©ÌåÓýƽ̨ most promising leads. 

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Get to see Inven’s tool in use in a demo.