Private Equity Deal Origination
The importance of technology for private equity deal origination
Deal origination is no longer just relationships—tech gives the edge.
PE deal sourcing is no longer a closed, relationship-led, “privileged” activity
The growth of the private markets means more competition for deals
Relationships matter, but finding signals in the noise of data help prioritise effort
A tech-led deal origination platform builds conviction early, enabling fast deal pursuit.
PE deal origination used to be more private: nascent demand, ample supply
The private equity industry looked very different 25 years ago:
Private markets were “alternative” - a higher risk, scary cousin of public markets
Somewhere between 1500-2500 firms focused on PE globally
Private market AUM was an order of magnitude lower at $600bn
Digital company data was almost nonexistent, let alone deal-sourcing software
The industry was built on personal networks and relationship-led deals. Proprietary deals - where a firm is the only bidder / has privileged access – were the ideal.
A limited number of firms, limited franchise awareness and a perceived disadvantage to public markets meant that PE deal-sourcing was (relatively) low competition. The industry looks significantly changed today - institutional, established - and crowded.
The new reality of PE deal origination: More capital, same pool
The private markets - and linked firms - have grown significantly over the past 20 years
Alternative no more - the now “traditional” allocation to PE is 5-20%
18k firms in the US alone (60% of which were founded in the past 5 years)
PE AUM is estimated at roughly $5tn (50%) of the $10tn private market AUM
A broad set of data providers and deal-sourcing tools are now in place
Staying private for longer, (or forever) is now an established norm, and at first glance, the growth has been huge. But diving deeper, the number of investable private companies has not grown at nearly the same rate as the volume of private capital.
This implies there are more investors competing to invest in a similarly sized pool of assets, with more money than ever before.
Proactive deal origination: winning with data-driven sourcing
This growth in interest (and competition) has impacted deal sourcing significantly, as:
More intermediaries mean more fees on non-proprietary deal flow
More auctions mean less relationship-building and eroded returns
Higher interest means higher multiples for the same businesses
More focus on off-the-market deal-sourcing as a primary driver of return
More investment in tech to build conviction, quicker, faster and independently
How you source deals matters as much as what operating the company afterwards.
There’s no time to spend on sourcing and qualifying opportunities that don’t match your (laser-focused) sweet spot - you need to be confident on your investment to hit a return.
The best firms now truly validate their investment sweet spot, spend time on the right opportunities, and realise efficiencies by automating the low-value workflows
The result is a more systematic, proactive sourcing approach. Instead of waiting for bankers’ deal books, PE firms are leveraging data through deal origination platforms to find signals that a company might be a good target or is preparing to raise capital.
Modern deal origination & technology
Deal-sourcing increasingly relies on building your tech stack to help you:
Being rigorous and thorough in your mapping to consider all potential assets
Identifying the highest-fit opportunities at an early stage and monitoring closely
Being ruthless in qualifying out opportunities at the top of your funnel
The trend is clear - automation and data analytics now play an integral role in deal sourcing, helping firms find “hidden” gems and decide where to focus limited partner time. Even smaller and mid-market PE firms use affordable tools to level the playing field, whereas larger firms may “stack” multiple tools together to get an edge
This is what we refer to as shifting your sourcing process from a “V Shape” (where you waste time qualifying out opportunities at each stage) to a “T Shape” ( identifying high conviction assets as early as possible and doubling down on them in your funnel).
In case you’re interested in our take - you can access our whitepaper on our approach to defining a Total Addressable Asset Pool as a fund, or see how Gain.pro’s deal origination platform serves hundreds of PE customers in supercharging their deal sourcing with our use cases here.
