Internal vs. External Origination Results

Prior to discussing the various methods and platforms private equity groups can use to support deal origination there is often debate over internal vs. external strategies.  While considerations of visibility, process control, and information ownership are important we feel that good data and ultimately results, should drive this decision-making process.

Traditional external deal origination

External deal origination efforts provide a number of benefits including:

  • Scalability
  • Cost flexibility (vendor dependent)
  • Workload distribution

While these benefits are significant, particularly in a small firm environment, there is one big negative factor that must be considered…

There is plenty of good data that supports the fact that third party origination efforts when presented as such, convert prospective leads at a rate almost 2 times lower than that of internal efforts.  There are a few possible reasons for this, including:

  • Increased complexity, more layers of communication (broker to target, broker to PE firm etc.)
  • Often large origination groups have flagged IP addresses and email accounts due to the high nature of email send volume

Internal deal origination

Internal origination efforts have their fair share of pro’s including:

  • Full process control
  • Elimination of success or other variable fees that can amount to tens if not hundreds of thousands of dollars per transaction
  • Generally higher conversion rates

Conversely, there are also con’s to the internal origination strategy including:

  • High fixed costs
  • Requirement for internal process management, data sourcing etc.

What if there was a ‘best of both worlds?’

What if there was a way to gain the benefits of external sourcing while maintaining the high conversion rate and success fee elimination of an internal sourcing effort?  Well, there is – and we provide it.

Our deal origination services combine the high rate of conversion and elimination of success fees common in internal origination efforts while leveraging the cost effectiveness of a specialized team on a short term commitment basis.  Here is how we do this…

  • All communication appers to be generated internally, so prospects feel as if there is no third party involved
  • Never charge success fees
  • Work on a 3 month commitment basis
  • Allow for a high level of visibility with dedicated analyst points of contact and weekly reporting.

If you are locked in the internal vs. external deal origination debate and would like to consider an alternate method, proven to be effective for firms large and small alike consider contacting us – we can help!

 

 

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