“How’s your pipeline?” we asked the head of one of the leading middle market arrangers in December. He shook his head. “The quality-adjusted deal flow is down.” That distinction resonated with a number of our middle market brethren. Complaints centered around ebitda adjustments, over-liberal debt allowance baskets, and covenant-lite (or covenant-wide) structures. “High leverage per…
Along with the sense that mid-cap lenders can now more than hold their own against the largest investment banks in terms of deal size has come a predictable question: With all the lending capacity that’s now available in the middle market, isn’t there too much cash chasing too few deals? A long-time middle market practitioner…
The notion that the middle market has reached a level of maturity was supported by a plethora of evidence this past year. For one thing, arrangers showed astonishing underwriting capacity by taking on a number of large-cap sponsored buyouts. Probably the most precedent-setting was Qlik Technologies. At just over $1 billion, this Ares-led unitranche represented a…
For those of us who have made the middle market our livelihood for a while, last week’s Wells Fargo 2016 Middle Market Opportunities Forum was an extraordinary event. To see the likes of Steve Schwartzman, Lloyd Blankfein, Leon Black, and (in a lunch keynote) Michael Milken, at a conference dedicated to the virtues of private…
Among the unlikelier events of this post-election season – other than the consideration of former World Wrestling Entertainment executive, Linda McMahon, to be head of the Small Business Administration – has been the confidence with which institutional investors have rotated into leveraged credit. This despite the uncertainty surrounding the future of all sorts of policy…
At this writing it’s only been three weeks since the November 8 “tectonic shift” – as veteran financier Henry Kaufman dubbed the US election results. And while this Brexit-like outcome has injected a high degree of uncertainty into capital markets globally, there are potential positives emerging. In particular, we are encouraged by possible tailwinds for…
We’ve received a number of positive responses about our special series on add-ons. One partner at a NY-based private equity firm particularly liked our focus on why the right culture matters. “The key is retaining talent,” he wrote us. “Even when it’s not apparent where they’ll be a fit. We had one executive who had…
Last week we began a check-list sponsors tick off when sifting through acquisition candidates for their platform companies. Many items are company and sector-specific. How will product lines complement each other? Will different brands confuse customers? If so, can you benefit from synergies by maintaining separate identities? But one private equity partner highlighted the most…
At a loan conference some years ago we referred to middle market loans as the Rodney Dangerfield of capital markets. These small, illiquid instruments were the poor step-child to high-yield bonds and large leveraged loans. But at Creditflux’s inaugural New York conference on private credit this past June, it was clear the situation has changed….
The process of identifying successful add-ons is a complex one. Each sponsor has developed over the years a different style and methodology depending on their investing approach. As we’ve noted, it’s also very sector-specific. Not every portfolio company needs to, or should, have the same acquisition strategy. One partner walked us through two scenarios. “We…