Even the biggest deals have to start somewhere — and rarely is it with an opportunity just falling in your lap.
For most firms, optimizing the deal flow process (how they find, vet, and then secure deals) is how they succeed and build their proprietary advantage. And the way they manage it, including their specific workflow and what tools they use, is critical to that success.
To help firms that are looking to use tech to advance their existing deal flow processes, we've rounded up the types of deal flow management tools that will help you, as well as the top vendors in each category. Let's dive in!
The deal flow process can differ from firm to firm and depends on each firm's particular processes and investment focus. But in general, it has five stages:
Stage 1: Deal Sourcing
Finding the right opportunity means determining an investment thesis and discovering the companies that match it. Firms will often use several deal flow management tools and methods to help source deals, especially if they are searching for private or bootstrapped opportunities.
Stage 2: Deal Screening
Once a firm has found a promising investment target, it needs to do further research to officially determine whether that company is interested and worth pursuing. This means meeting and having discussions with the company.
Stage 3: Stakeholder/Partner Review
Before the firm starts the arduous due diligence process, the team meets to discuss their most promising potential opportunities and get input from key stakeholders and partners.
Stage 4: Due Diligence
Due diligence involves performing a deep dive into the target acquisition, surfacing financial and employee records, understanding the company culture, and discerning if the company is one that they want to move forward with.
Stage 5: Transaction
If everything about the company checks out and all stakeholders are on board, the firm closes the deal and money exchanges hands.
Firms often use a combination of different deal flow software at various points throughout the deal flow process. Let's discuss each type of deal flow tool and how it helps facilitate dealmakers’ workflows.
Deal sourcing platforms are key to starting your deal flow process on the right foot. While most have vast amounts of data available on all types of companies, some specialize in certain types of companies, such as public or private. They make traditionally manual, time-consuming research tasks like market mapping much faster and easier for dealmakers.
Not only do these platforms help you search for, filter, and score companies to source the right investment opportunities, but they will also help you discover and verify information about those businesses during screening and due diligence. The best deal sourcing platforms have AI-assisted, human-in-the-loop machine learning and data validation processes, as well as automation features that monitor top targets, notify you of any changes, and alert you of newcomers.
Once you have data on potential opportunities, you need a place to store that information and collaborate with the rest of your firm. Sometimes referred to as a "pipeline management system," a customer relationship management system (CRM) is that place. A CRM will track all your investment opportunities before, during, and even after they have progressed through your pipeline. It stores company and contact information, activity history, previous engagements, and more to help you learn all there is to know about your target investments.
Two critical features of a good CRM are its flexibility and its ability to integrate with the other tools your firm uses. Every firm functions differently, from lead management and routing to vetting and closing. Your CRM must be able to mold to your firm's workflow and adapt to fit your needs. Similarly, the platform must be able to integrate with the rest of your deal flow management tools. Only when the CRM can sync all the information — data signals from your deal sourcing platform, secure documents into your virtual data room (VDR), etc. — can it truly become the space you need to streamline your deal flow process.
To make the right decision about whether to proceed with a transaction or not, you must vet the company end-to-end. Take a deep dive into their systems. How do they work? What is their culture like? Would your firm be able to work effectively with them? Financial records, employee history, intellectual property, and more should all be at your disposal. Due diligence software helps make that happen.
The due diligence step is critical, and the deal flow software you use to manage it is key. As with the rest of your tech stack, integration with other deal flow tools is mandatory to help you accurately categorize information to streamline decision-making. After all, it's better to learn everything you can about a company before you make a deal with them to ensure you know what you are getting — and that you're paying the right price.
Confidentiality is not just a suggestion with M&A; it's a mandate. VDRs help ensure information is only seen by those who need to see it. It's certainly easier to store documents in more easily accessible locations such as Google Drive, but the delicate nature of deals — and the consequences of a breach — means you shouldn't take any chances.
Throughout the deal flow process, a VDR can help you package documents and securely transfer them between deal flow management tools, as well as between the buy-side vs. sell-side. VDRs also usually come with version control and signature collection features to help streamline the overall document management process, rather than simply serving as cloud storage.
To help dealmakers choose the best deal flow software, here are the top options for each category:
As the only AI-powered sources-first deal sourcing platform, Sourcescrub has over 150,000 sources with billions of data points to give dealmakers the high-quality company information they need throughout the deal flow process. With Sourcescrub, dealmakers get not only the difficult-to-find data on private companies, but they also get the context necessary behind each data point to understand the market better, as well as data signals that determine companies' growth intent and transaction readiness.
Originally a data source that has since expanded to try to fill many dealmaking needs, Pitchbook is still a popular choice simply because of how much information it gathers. The platform offers solutions to help companies on both the buy-side with sourcing potential investments and the sell-side with finding potential investors.
Grata helps dealmakers collect important data on specific companies and entire industries, ultimately simplifying and speeding up the deal flow process. Using this information, firms can gain the insight they need to create more personalized lists and identify opportunities that align with their investment strategies.
Salesforce is a titan within the CRM industry and, for many high-tech companies, held as the gold standard. Its incredibly robust and comprehensive feature set can be molded to fit nearly any business' needs. However, that also means your firm will need dedicated resources to take full advantage of the platform.
Dynamo offers a CRM as part of its investment management platform, which aims to help both the buy-side and sell-side of the market streamline their workflows. With investor relations and fundraising, as well as portfolio monitoring and even accounting for dealmakers and their firms, Dynamo practically does it all.
As a CRM tailored specifically for the finance industry, DealCloud's goal is to assist firms with managing all aspects of the M&A process, not just deal flow. From pipeline and portfolio management to handling documents and even marketing, DealCloud seeks to offer firms a single place from which they can work and collaborate.
Due diligence is a complicated process with many stakeholders, requests, and workflows all happening at the same time. DealRoom's due diligence software aims to streamline that process and help both sides of any potential transaction share information and collaborate more efficiently.
Focusing on the buy-side, Intralinks DealVision™ helps dealmakers efficiently work through the due diligence stage of the deal flow process. The platform is purpose-built for dealmakers and helps with task and document management — including an integration with Intralinks' VDR
By fully integrating its project and document management features, Midaxo's due diligence software centralizes firm communication to streamline work and increase collaboration. It even offers due diligence "playbooks" that firms can reference to start due diligence on the right foot and keep it moving throughout the often-arduous process.
A leading option in the VDR space, FirmRoom prides itself on giving dealmakers a robust and easy-to-use solution for secure document management during the deal flow process. Quick to set up and learn, FirmRoom's platform promises to help your firm get a VDR up and running in no time.
Building off its history as a leader in the cloud document management space, Box offers a VDR to help securely store and share documents throughout the deal flow process. If your firm already uses Box for cloud storage, its signature and VDR products are a natural extension to help streamline work and keep documents secure.
As part of its overall deal flow management tool, Datasite Acquire™ is a VDR that focuses specifically on streamlining and securing document transfer during acquisitions. With all the features you'd expect from a VDR with project management tools built on top, Datasite offers dealmakers multiple methods for making the deal flow process a smooth one.
While each step of the deal flow management process is important, mastering deal sourcing accelerates and streamlines each of the other four stages. That’s why choosing the right deal sourcing platform and starting your search out on the right foot is critical.
Twenty-four out of the top twenty-five private equity and investment banking firms choose Sourcescrub’s deal sourcing platform to help them discover more opportunities, close more deals, and return more on investment. Request a demo to see how our deal sourcing platform can help your firm!
