Scott Kiley,
Capital Markets Expert,

I’ve never sold an equipment lease or loan myself — so what do I know about being a good syndicator? I’ve been buying deals for 22 years and managed a capital markets team for three years. This real-life experience via daily interactions with syndicators enables me to provide a unique perspective on what I believe makes for a great syndicator.

TWO SIDES OF THE SAME COIN
There is a significant difference between being an effective buyer and an effective syndicator. A buyer must primarily rely on themself to make things happen. A syndicator not only has to rely on others to build a pipeline, but also must please many different parties with varying needs to get a deal sold. This makes the job of a syndicator harder, in many respects, than being a buyer.

Many of you who know me well have heard me say: “I had great passion and success being a buyer, but I would not have lasted long as a syndicator.” Contributing to this belief, I would have struggled trying to please so many people. I preferred being self-reliant with a laser focus, searching for those deals that fit our credit and pricing parameters. A syndicator must be ready and willing to sell any type of deal their relationship managers (RMs) originate across the credit and pricing spectrum. Does this mean that a person can’t be a very successful buyer and seller during their career? I think it’s possible, but rare.

SYNDICATION FOR EQUIPMENT FINANCE CAPITAL MARKETS
Why do many in the equipment finance capital markets space gravitate to a career in syndication? My observation is that syndicators are attracted to the steady deal flow coming from the many RMs they support. Another perk is that syndication will always be a core strategy at most bank leasing companies, and the fees generated become addictive to HQ. This leads to much better long-term job security for syndicators.

While HQ’s rapidly-changing appetite for assets from one year to the next can impact both syndicators and indirect originators, my experience is that these changes can be more severe and sudden to an organization’s buy-desk strategy and team.

PLEASING ALL PARTIES
Let’s look at all the parties a syndicator must please:
• Equipment finance RMs and their managers
• Bank RMs and their managers (when working with a bank customer)
• Customer CFO and/or CEO
• Internal credit officers and asset managers
• Investors and their credit officers and asset managers
• The documentation and funding teams on both sides of the deal

Keeping all these parties happy and motivated throughout the deal process is no small task. Each of these parties is a “customer” who has different needs and wants that must be satisfied.

CRITICAL SUCCESS QUALITIES
The primary — and overriding — job of a syndicator is to have an intimate knowledge of the credit and pricing profile of every buyer in the market. This takes constant interaction with buyers because credit appetites and pricing requirements can change rapidly. In addition, new entrants are constantly coming into the market while others are exiting or scaling back dramatically.

In my many years at Fifth Third, we would sell deals to over 30 different investors with an attitude that there is a home for every awarded deal. A syndicator must have real-time marketplace knowledge to be a successful syndication partner to their RM team. Identifying the right investor for a deal is the number one priority.

To be successful, syndicators must be patient but act with a sense of urgency when needed. A syndicator will be assigned a handful of equipment finance RMs at a time. Some will be fully on board with the syndication strategy, while others just won’t understand the benefit. A syndicator must be patient but persistent with the RMs who aren’t bringing them into client relationship management strategies.

Syndicators must continuously address RMs’ concerns about syndication while demonstrating the benefits of a syndication strategy to grow their customers’ relationships. I found that the RMs who haven’t bought into syndication have very little experience with it. The best way to get this type of RM on board is to get a deal done. The RM will soon understand that the key benefit to syndication is doing more business with their existing customer base, putting more money in their pockets.

THE RMS WHO “GET IT”
On the other hand, the RMs who regularly use syndication are part of the “80” in the 80/20 rule (80% of business comes from 20% of your customers), and they must be given the attention they deserve. These are the RMs who are expecting you to have a sense of urgency when they bring you a deal to syndicate. They typically have a handful of customer relationships where they are awarded the bulk of the company’s annual equipment financing needs, and the CFO is sold on the benefits of syndication.

These companies become “programmatic” syndication customers that must be given the highest level of attention to offer seamless and efficient deal execution. In these relationships, the RM allows the syndicator and the closing team to work directly with the CFO and other company personnel, all acting with a sense of urgency, to close deals.

MULTI-FACETED SKILLSET
Great syndicators have “chameleon-like” qualities. We’ve established that a syndicator must meet the needs of many different “customers.” They also must fully embrace being able to sell many different types of deals across a broad spectrum of credit quality. As a buyer, I was able to look at each deal as a pitch coming into the batter’s box, and I was looking for those “pitches” in my “credit and pricing strike zone.” It paid to be patient and wait for the good pitches.

As a syndicator, you don’t have a choice but to look at every pitch (or awarded deal) thrown, trying to make contact with each ball and hit it to the right investor. Much like a chameleon changing colors to adapt to their surroundings, an effective syndicator must “change their colors” to work effectively with different personalities and deal types.

DISTRIBUTION STRATEGY
Great syndicators have a knack for determining the best syndication distribution strategy. The three key questions that must be answered on each syndication are:
• Do we go wide in our distribution, or just show it to a few potential investors?

• Which buy-desks do we show it to?

• Who do we ultimately award the deal to?

Regarding whether or not to “go wide” in distribution, the general rule of thumb is that, when you have a deal that is deemed “tougher” because of the credit quality, asset type or structure, it is best to use a wider distribution approach. This is necessary not only to find the optimal investor, but to have a plan B and C in your pocket.

On the other hand, a deal with a great credit that is structured and priced well and will easily clear the market can be sold to many buy shops. If you show that deal to 12 buyers who would all push hard for an award, you will end up disappointing 11 of them. In this scenario, it might be best to identify a few buyers who have great pricing and have demonstrated efficient closings.

The disruptions in capital markets after the March 2023 bank failures led many syndicators to broaden the distribution of all deals during 2023. This was necessary because of the rapidly-changing appetites at even the most historically reliable buy shops. It appears that the capital markets are operating in a more normalized fashion in 2024.

WHO SEES THE DEAL?
In some cases, the client will dictate avoiding certain institutions or including members of their bank group. A syndicator’s in-depth knowledge of each buyer’s appetite are additional inputs into answering which buy-desks should see the deal and who ultimately gets the deal. Obviously, the buyer’s credit and pricing box must be a solid match to the deal, but there also may be unique deal points (i.e. heavily-negotiated docs that are lessee-friendly) that eliminate certain buy shops or heavily factor into the award. Buyer A may have the best pricing generating the highest syndication fee, but buyer B is easier to work with and will be more accommodating to lessee friendly docs that cannot be amended.

Pricing aside, other factors to consider when awarding a deal include:
• Rewarding reciprocal capital markets partners
• A desire to spread business around to a handful of strategic investors (Buyers, sometimes it is just your turn!)
• Willingness to buy the deal on a non-notification basis
• Ability to close quickly
• Waiving an equipment inspection
• Willingness to treat some items on a post-closing basis.

STAY IN THE MARKET
In conclusion, an effective syndicator must stay in constant communication with their existing buyers while also searching for new sources of money to be the reliable capital markets partner to their team of RMs. The most successful syndicators enjoy the challenge of acting like a “chameleon” to adapt to differing personality types and sell a wide spectrum of deal types. The most seasoned syndicators can quickly determine the best syndication distribution and award strategy for each deal. •

Scott Kiley recently retired after a 35-year career in the equipment finance industry, including the last 25 years at Fifth Third’s Equipment Finance Capital Markets Group.