What is 'Deal Flow'

Deal flow describes 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 indicate 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 sluggish equity markets may generate some deal flow for only the most established players.

BREAKING DOWN '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.

While deal flow can be generated from a number of sources, the proposals that are likely to garner the most attention are the ones from companies or entrepreneurs where a previous investment has been successful, or where there is a solid existing relationship. On the other hand, unsolicited proposals from untried entities are likely to be given short shrift by most established financiers.

Example of Deal Flow

Deal flow often follows a cyclical pattern, and trends unfold throughout society and economic environments. For example, in the 80s, "high-tech" industries adopting the early stages of digitization saw healthy deal flow for inputs up and down the supply chain. By the turn of the century, information technologies were all the rage. And by 2008, the Internet of Things was taking off, and today, software (Software as a Service) enjoys far more deal flow than hardware providers.

In the future, deal flow will follow where growth opportunities will come from: such as artificial intelligence, evidence-based medicine, and connected consumer devices.

RELATED TERMS
  1. Price to Free Cash Flow

    A valuation metric that compares a company's market price to ...
  2. Free Cash Flow Yield

    An overall return evaluation ratio of a stock, which standardizes ...
  3. Free Cash Flow Per Share

    On a per share basis, free cash flow per share is cash available ...
  4. Sales To Cash Flow Ratio

    The sales to cash flow ratio shows how efficiently a business ...
  5. Cash Flow From Investing Activities

    An item on the cash flow statement that reports the aggregate ...
  6. Cash Flow Statement

    One of the quarterly financial reports any publicly traded company ...
Related Articles
  1. Investing

    Evaluating A Statement Of Cash Flows

    The metrics for the Statement of Cash Flows is best viewed over time.
  2. Small Business

    Understanding Cash Flow

    Learn about the different types of cash flows and the importance for businesses to properly manage their cash flows.
  3. Investing

    Cash Flow From Investing

    Cash flow analysis is a critical process for both companies and investors. Find out what you need to know about it.
  4. Investing

    Free cash flow yield: The best fundamental indicator

    Cash in the bank is what every company strives to achieve. Find out how to determine how much a company is generating and keeping.
  5. Investing

    Analyze Cash Flow The Easy Way

    Learn the key components of the cash flow statement and how to analyze and interpret changes in cash. Improving free cash flow means a company is in a better position to reward shareholders. ...
  6. Investing

    Corporate cash flow: Understanding the essentials

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  7. Small Business

    Who are Venture Capitalists?

    Venture capital investment firms can provide the seed money for high-risk, start-up companies. People called venture capitalists run these firms, and make the investment decisions.
  8. Investing

    Cash Flow Indicator Ratios

    Learn about the operating cash flow to sales ratio, free cash flow to operating cash flow ratio and free cash flow coverage ratio.
  9. Investing

    5 Companies With Huge Cash Flow (AAPL,VZ,MSFT,WMT)

    These five companies have major cash flow which makes them good long-term bets.
RELATED FAQS
  1. What are the main differences and similarities between Money Flow and Real Flow?

    Learn the meaning of the terms "money flow" and "real flow," and find out how they relate to each other as they are used ... Read Answer >>
  2. Free & operating cash flows: What's the Difference?

    Learn the difference between free cash flow and operating cash flow. Explore how analysts use earnings and cash flow to evaluate ... Read Answer >>
  3. How should I evaluate a company with negative cash flow investing activities?

    Understand how a negative cash flow from investing activities should be evaluated. Learn the sources and uses of cash in ... Read Answer >>
  4. What is the difference between cash flow and free cash flow?

    Learn about the main differences between cash flow and free cash flow. In addition to the differences, learn how to calculate ... Read Answer >>
  5. Why is the Money Flow important for traders and analysts?

    See why the concept of money flow is useful in technical stock market analysis, and how traders and analysts can use money ... Read Answer >>
  6. What is the difference between cash flow and revenue?

    Understand the difference between cash flow and revenue as they relate to corporate accounting and the financial evaluation ... Read Answer >>
Hot Definitions
  1. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  2. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  3. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  4. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  5. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  6. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
Trading Center