sourcing and screening field sourcing refers to the process in which PE firms screen investment opportunities and identify attractive targets given the large number of potential deals available private Equity firms rigorously filter out those that do not match their mandate or Focus then they filter out less financially attractive opportunities and focus on those offering the best returns. There are steps that help Source deals internally private Equity professionals will research their area of focus including size of business sector of operation and geography to identify targets that they would like to approach and that might be for sale.

These areas will be vetted by the senior most professionals at the firm.

Externally through firstly proprietary deal flow which uses the private Equity firm's network comprising of Business Leaders owners and Founders and secondly through intermediated deal flow, which uses paid advisors such as investment Banks consultants and Auditors once targets are identified initial screening will begin and this will involve Gathering as much information on the businesses as well as starting to analyze what sorts of return opportunity each could generate if acquired internally, this will involve maintaining a database of all opportunities that the private Equity Firm may wish to look at now or later as well as some analysis using information gathered.

Usually this takes the form of an internal pipeline spreadsheet.

Which briefly describe the targets and help prioritize which ones to go after prioritize targets then get further analyzed using short profile formats called screening memos that are used for some of the businesses that potentially may make good targets. These profiles will describe the deal opportunity the business as well as the private Equity firms angle to close the deal for example a relationship with the vendor or deep knowledge of the business and industry externally, this will involve discussions with advisors or professionals that are familiar with the Target and it's current ownership situation as well as information gathering from external sources such as consultants or publicly available information. It will often also involve early stage or introductory contact with business owners that may eventually become sellers or vendors the Intensive process of filtering through opportunities. Will sometimes go from many hundreds of names per year to a few hundred that fit the private Equity firms mandate.

To tens of them that then may go through the full process and only a handful actually being successfully closed and becoming portfolio companies a well-established private Equity Firm May well filter through a thousand opportunities a year to eventually only execute a handful or even in difficult economic environments none at all as an example a filter funnel for a large private Equity Firm may be 800 targets per annum profiles of which 200 fit from a size sector and Geographic perspective 50 a credible in terms of potentially being acquired.

12 of which turn into formal processes and only three are one and closed.