Ideas to improve marketing to your Family Office / Sponsor deal to the Senior Bank Market (THREAD)

Your equity thesis isn’t my debt thesis. Very important to understand why you are buying the company but your focus is to maximize return and ours is to minimize loss (1)

We look for safe or sound loans. Safe-> Think low leverage/high equity/ strong asset coverage. Sound -> Cash flow sustainability, high margins, low concentrations (2)

Get your CIM in order but call your banker 1st - Preview the deal - Highlight who they are, what they do, but identify the weaknesses - Own the narrative and don’t hide from the cobwebs (3)

Don’t ever try to convince us that a risk is overblown. My job is to mitigate the risk internally - give me the tools to do so.

CIMs are mostly marketing - let us know what you know. What is fluff? What are key items of focus? What items need a lot more diligence? (4)

One FO I work with create their own CIM and models based upon the Inv Banking CIM. No CIM - No problem - They make one. They own the narrative (5)

Leverage & equity multiples are highly correlated. It’s not just about leverage but cap structure

Our LevFin group will lever their deals to 3-4x and won’t do a 1-2x for deals they hate. Our relationship group will adjust leverage for the risk. Know where you sit in the bank (6)

Does the bank have any assets in the space you are investing? Do they actually have comps to understand if this is a good deal or not? Ask these questions (7)

Adjust your bank based upon the deal size. Have a cadre of lower, mid and big banks if you work across markets. Dedicate your efforts on widening relationships months/years before a deal (8)

That time spent will get us to consider the relationship built, not simply just looking at a transaction. (9)

This next part is harder - you have to cull the herd. You need to identify over time who is a good banker and who isn’t. How many buyouts have they financed in the last years? Have they been stuck at VP title for a decade? (10)

Credit officers have strong viewpoints and natural bias when reviewing loan write ups. They may have solidified their opinion based upon the submitting RM even before they’ve read it (11)

Be wary of excuses or bank politics. It’s a sign they aren’t well respected internally. When a deal is declined for term sheet issuance, I explain why it’s not for us. I’ll never blame my credit officer (12)

Assess your deal risk if your RM were to leave. Have multiple points of contact at the bank - you NEED to uptier (13)

Banks are beyond political and senior leadership holds the clout and make the final decision. See tweet 9 - Do they know you or are they just looking at a 2 pager on the business? Make them part of the deal team (14)

I’ve noticed sponsors will stop talking to a bank based upon the banker. Senior connections allow for a change of the banker without separating ties w the bank for multiple years (15)

A good banker at a bad bank still sucks but can manage for a bit

A bad banker at a good bank is pushing on a string

A good banker at a good bank is absolute magic

Can follow up another day if there is interest on this last tweet

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