In the world of private equity, investment banking, and family office investing, it can be hard to know where to start when dealing with deal origination and deal sourcing.
With the TruSight, LLC FAQ, we have compiled a comprehensive list of commonly asked questions to help you get informed and make the right choices for your business.
For over 10 years, TruSight, LLC has focused on providing subscription-based deal origination, retained buy-side acquisition search, and contingent deal sourcing services for professional investors, private equity funds, family office investors, and business intermediaries. Our reputation for successfully broadening and accelerating deal flow has been built through our industry expertise, professionalism, and partnership philosophy. Our partner clients benefit from our process and technology investments in data, advanced analytics, and AI-driven behavioral insights. In February of 2022, TruSight acquired Private Equity Info, strengthening its position in business intelligence and data science for deal origination.
Deal sourcing in private equity refers to identifying potential investment opportunities for a private equity firm. This involves research, business networking, relationship development, sales, and marketing in order to find companies that have excellent potential for the firm's investment criteria or investment thesis and have a probability for a high return on investment.
A private equity fund is a type of investment vehicle used by private equity firms to raise capital from investors. Private equity firms typically use the funds they raise to invest in companies they believe have strong growth potential. The goal of a private equity fund is to generate a high return on investment for its investors, typically through a combination of capital appreciation and income from dividends or other sources. Private equity funds are typically structured as limited partnerships, with the private equity firm acting as the general partner and the investors serving as the limited partners. Private equity firms typically charge their investors a management fee for managing the fund and take a percentage of any profits earned.
A deal origination platform is a digital tool or system used by investment bankers, private equity funds, and other financial professionals to identify and initiate potential deals or transactions. These platforms typically provide a range of features and capabilities, such as the ability to research companies and markets, connect with potential clients, manage and track deals, and collaborate with colleagues. The goal of a deal origination platform is to streamline and enhance the process of finding and pursuing potential deals and to provide a comprehensive, centralized hub for managing the entire deal lifecycle.
A business advisor is a professional who provides guidance and advice to businesses on a range of topics, such as strategy, operations, management, and finance. Business advisors typically have expertise in a specific area, such as marketing, human resources, or finance, and can provide valuable insights and recommendations to help businesses improve their performance and achieve their goals. Business advisors may work with businesses of all sizes, from small startups to large corporations, and can provide a variety of services on a contract or consulting basis. In some cases, business advisors may also provide mentoring and coaching to help business owners and managers develop the skills and knowledge they need to succeed.
A roll-up strategy refers to the acquisition, merging, and consolidation of multiple smaller companies into a larger company. This can be done through mergers and acquisitions, where the acquiring company buys multiple smaller companies and then combines or "rolls them up" into a single company. The goal of a roll-up is typically to create a larger, more diversified company that can achieve economies of scale and generate cost savings.
A business broker is a professional company or intermediary that helps small and medium-sized businesses find buyers or sellers. They typically work on a commission basis, and their services can include the following:
- Assessing the value of the business
- Advertising the business for sale
- Identifying and screening potential buyers or sellers
- Negotiating the sale or purchase of the business
- Helping to close the transaction
Business brokers can be independent or affiliated with a brokerage firm. They may also focus on specific industries or types of businesses. The goal of business broker is to match qualified buyers with motivated sellers and assist in the process of buying or selling a business, and guide the parties through the transaction and legal process.
A private equity portfolio company is a business owned by a private equity firm. The PE firm typically has acquired the company to improve its operations and financial performance. The private equity firm may also take an active role in the portfolio company's management.
A professional investor is an individual or organization with the experience, knowledge, and expertise to make investment decisions in investing, such as managing money on behalf of other individuals or institutions. They have knowledge, experience, and resources that typically exceed those of the average retail investor. They may be subject to different regulatory requirements and are often held to a higher standard of care when managing investments. Examples of professional investors include hedge funds, mutual funds, and institutional investors such as pension funds, endowments, and sovereign wealth funds.
A strategic acquirer is a company that acquires another company to expand or strengthen its operations in a specific market or industry. This type of acquisition is typically motivated by the desire to gain access to new technologies, products, or customer bases or to eliminate a competitor.
A financial acquirer is a company that acquires another company with the primary goal of generating a financial return on the investment. This type of acquisition is typically motivated by the desire to make money rather than to expand or strengthen the operations of the acquiring company. Financial acquirers typically focus on the short-term economic benefits of the acquisition, such as cost savings from economies of scale or the ability to sell off non-core assets.
Private equity business development refers to the business process used by Private Equity Firms for identifying, analyzing, and executing potential investment opportunities. This function typically includes identifying companies or businesses that are a good fit for the firm's investment strategy and then working to acquire or invest in those companies through various financial and strategic means. In addition, business development professionals in private equity firms often conduct market research, identify potential targets, and negotiate deals.
Proprietary deal flow refers to business transaction opportunities, including acquisitions, investments, or partnerships created or identified by a Private Equity Firm, Investment Bank, Family Office Investor, or business intermediary controlled or "owned" by the company. In other words, the business transaction opportunities are known only by the company and typically created through relationships, Deal Origination efforts or business development teams.
Private equity vs. investment banking
In brief private equity firms acquire and manage companies, and investment banks raise capital and provide financial advice to companies.
Private equity refers to buying and selling privately held companies to improve their operations and then selling them for a profit. Private equity firms typically create Private equity funds by raising capital from institutional investors and high-net-worth individuals. The PE firm then manages those funds to acquire and manage companies creating a return for their investors.
Investment banks provide advisory services for mergers and acquisitions (M&A) and raise capital by underwriting securities. In addition, investment banks act as intermediaries between companies needing to raise capital and investors looking for opportunities to invest their money. Investment banks also help companies issue debt or equity securities and provide industry insights.
A platform acquisition is a business purchasing another business to add to its capabilities and offerings or enter a new market. The acquired company or "platform" company provides a new platform for the acquirer with new resources and revenues that it can use to grow its business.
An add-on or bolt-on acquisition is a merger and acquisition strategy where a company purchases another company that adds to its existing business operations or products. The acquired company "adds on" to the acquiring company's current business model, services, or product offerings. Add-on acquisitions allow the new combined company to expand rapidly, have a more significant market share, and take advantage of economies of scale.
Divestiture is the sale or "spin-off" of a division, subsidiary, or product line by a company. Divestitures allow a company to focus on core business operations or other strategic benefits like accessing operating capital, reducing debt, complying with regulatory requirements, or increasing the company's overall value.
A pre-exit acquisition is an M&A strategy executed before a company plans to exit a market or business segment used to maximize the value received from selling that business unit.
A company will sell a business unit or division in a pre-exit acquisition before it exits the market. As a result, the company will typically receive a better selling price for the business unit or division, as the acquiring company can purchase it at a lower valuation, and the company can focus on its core business after the sale.