60 Seconds with Sixpoint: How to Improve Your Lender Relationships and Why
In our bi-weekly communication with our readers I usually focus on topics related to LP relationships and fund-raising initiatives. This week however, I wanted to examine problems private equity funds face every day – time management and resource allocation.
Senior and mid-level private equity professionals core competency is sourcing new investment opportunities, underwriting and executing acquisitions, and managing portfolio companies for long-term value creation – it is inefficient to spend time managing lender relationships and diligence processes for acquisition financing or capital structure refinancings. Private equity funds utilize debt placement advisors for a variety of reasons:
1. Greater Market Access – The number of debt capital providers has increased exponentially making it very difficult and time consuming for sponsors to manage these relationships. Furthermore, lenders have transitioned to a pure coverage model, whereby if you are a new firm or lack the consistent deal volume you may be underbanked by the lending community. Advisors provide access to the right set of financing partners for your individual deal or refinancing.
2. Better Use of Time and Resources – As we highlighted above, a deal team’s time is better spent sourcing and executing investment opportunities. This is where LPs want you to focus your time and attention. The success of the next fundraise will be dependent on the success of your portfolio companies, not your ability to partner with a specific lender and answer their diligence questions.
3. Drive Terms and Reduce Execution Risk – When seeking a financing structure private equity funds typically reach out to a minimal number of relationships, limiting price discovery because they do not have the bandwidth to make additional calls and continuously answer diligence requests. Advisors manage negotiations on terms to optimize the financing package, while maintaining several alternative solutions to minimize deal risk.
4. New Limited Partner Relationships – Sixpoint’s full-service platform and track record as a market leader in raising private capital across the private equity landscape enables our debt placement clients to access premiere co-investment equity partners and primary LPs during the transaction to facilitate new LP fund relationships.
If you would like to learn more about our debt placement and advisory services please reach out and connect.