The Proprietary Deal Flow Playbook for PE Firms

Proprietary deal flow is the most overused phrase in private equity. Every fund deck claims it. Few funds actually have it. Here is the difference between real proprietary sourcing and the theater version.

What Proprietary Deal Flow Actually Means

Proprietary deal flow means you see an opportunity before other buyers. Ideally, before the seller has even decided to sell. It does not mean:

• Getting a broker teaser 24 hours before everyone else
• Having a "relationship" with a banker who sends you every deal in your sector
• Browsing Axial and calling it sourcing
• Attending conferences and collecting business cards

Real proprietary sourcing means identifying companies that match your thesis, reaching the owner directly, and initiating a conversation about a potential transaction before a broker is involved.

The Economics of Proprietary vs. Brokered

The numbers tell the story:

Brokered process:

• Purchase multiple: 6-8x EBITDA (competitive auction dynamics)
• Win rate: 5-15% (multiple bidders)
• Diligence cost per failed deal: $50K-$150K
• Time from LOI to close: 90-120 days
• Seller expectations: maximized through competitive tension

Proprietary deal:

• Purchase multiple: 4-6x EBITDA (no competitive pressure)
• Win rate: 30-50% (you are often the only buyer at the table)
• Diligence cost per failed deal: $25K-$75K (less complexity)
• Time from LOI to close: 60-90 days
• Seller expectations: relationship-driven, often prioritize fit over price

The difference between paying 5x and 7x on a $3M EBITDA acquisition is $6M in purchase price. That is the value of proprietary deal flow, quantified.

Building the Machine

Step 1: Thesis-Driven Targeting. Start with your thesis, not with a database. What industries? What revenue range? What geography? What ownership profile? The tighter your criteria, the more relevant your outreach.

Step 2: Systematic Identification. Screen thousands of companies against your criteria. Not once. Continuously. New businesses form, owners age, market conditions shift. Your target universe is dynamic.

Step 3: Multi-Touch Outreach. One cold letter does not create a relationship. Plan for 6-12 touches over 12-18 months. Mix channels: direct mail, email, phone, industry events, intermediary introductions.

Step 4: Relationship Nurturing. Track every interaction. Set follow-up cadences. When an owner says "not now," that is not a rejection — it is a timeline. Most business owners think about selling for 2-5 years before they act.

Step 5: Pipeline Management. Treat your sourcing pipeline like a sales pipeline. Track stages: identified, contacted, engaged, evaluating, LOI, close. Measure conversion rates at every stage.

The Ted Advantage

Ted handles the identification and qualification stages at a scale that humans cannot match. Thousands of companies screened weekly against your thesis. Ownership verified. Financials estimated. Targets scored and ranked. Your team receives a steady stream of qualified targets ready for relationship-building outreach.