Definition
Deal flow is a term used by finance professionals such as venture capitalists, angel investors, private equity investors and investment bankers to refer to the rate at which they receive business proposals/investment offers. The term is also used not as a measure of rate, but simply to refer to the stream of offers or opportunities as a collective whole. An organization’s deal flow is considered “good” if it results in enough revenue- or equity-generating opportunities to keep the organization functioning at peak capacity.
Deal Flow
What is ‘Deal Flow’
The rate at which business proposals and investment pitches are being received by financiers such as investment bankers and venture capitalists. Rather than a rigid quantitative measure, the rate of deal flow is somewhat qualitative and is meant to provide an indication of whether business is good or bad. The state of the economy has a significant influence on the level of deal flow. Economic expansion and robust equity markets will usually generate healthy deal flow for most financiers, while a recession and/or sluggish equity markets may generate some deal flow for only the most established players.
Explaining ‘Deal Flow’
Deal flow can comprise many different types of proposals: venture funding, private placements, syndications, initial public offerings (IPO), mergers and acquisitions. While large investment banks can handle most of these activities, specialist financiers such as venture capitalists and angel investors will generally focus on deal flow only in their area of expertise.
Further Reading
- The impact of all-star analyst job changes on their coverage choices and investment banking deal flow – www.sciencedirect.com [PDF]
- The practice of the life science venture capital industry: compensation, deal flow, and contracts – jpe.pm-research.com [PDF]
- What drives capital flows? The case of cross-border M&A activity and financial deepening – www.sciencedirect.com [PDF]
- Real options in practice: an exploratory survey of how finance officers deal with flexibility in capital appraisal – www.sciencedirect.com [PDF]
- Finance-dominated capitalism in crisis—the case for a global Keynesian New Deal – www.tandfonline.com [PDF]
- Project financing: Deal or no deal – www.sciencedirect.com [PDF]
