What is Deal Flow?

Deal flow describes the rate at which business proposals and investment pitches are being received by a firm.

The term is usually used by M&A (mergers and acquisitions) firms, investment bankers, and venture capitalists.

There’s no specific way to calculate deal flow. The term is often used in a qualitative rather than a quantitative way. For instance, “deal flow is good” or “deal flow is better than last year.”

The concept of deal flow can also incorporate the quality of the proposals. Being offered lots of low-quality potential deals doesn’t make for a good deal flow.

What types of proposals are included in deal flow?

Deal flow typically encompasses a number of different proposals, such as mergers and acquisitions, venture funding, private placements, syndication, and IPO (initial public offerings).

Usually, big firms will take on lots of different types of deals, whereas angel investors and venture capitalists will focus on one type of deal where they have existing expertise. 

How do you improve deal flow?

To improve deal flow, you can look at:

  • Inbound deal flow: deals that come to you, either through people approaching you directly or through your network. It’s common for deal flow to come through referrals from other professionals.
  • Outbound deal flow: deals that you seek out, such as looking for and approaching companies you can invest in.

Deal flow tends to follow a cyclical pattern and is influenced by society and the wider economy. Trends over time will be reflected in deal flow. For instance, during the past few years, there has been a high deal flow in cloud computing and software as a service (SaaS), especially in areas like cybersecurity and health information technology.