Impersonal e-mail messages, online deal platforms and the click of a mouse are not always a good substitute for a real conversation and firm handshake to seal a deal. The value of instant communication obviously should be celebrated and utilized. But, those that buy and sell syndications — lease syndications or other types — should be very aware of the increased inefficiencies of relying solely on available technologies and losing sight of the people or personalities in the small universe of the lease and loan syndication market.

Transaction Rationale
It’s always hunting season when it comes to syndications. Whether you are looking to buy or looking to sell by assignment or participation, the hunt is always on for just the right deal. In fact, not every deal brought to the table by internal resources or through the secondary market make the cut. While the overarching objective in syndicating transactions is to reduce the risk or exposure for any one institution, more specific objectives for syndicating a transaction can be broken down into a short and rather finite list, managing:

The Good, The Bad, The Ugly
Every institution approaches the market in its own unique way. What truly differentiates the good from the bad to the ugly, are the professionals managing each transaction. Most financial institutions have specific individuals designated to buy and others designated to sell transactions whether they be leases or loans. Much time can be saved and fewer internal resources utilized by taking the time upfront to first identify the most appropriate institutions for your transaction. But take the extra step to also identify the lead business contact at those institutions to define your target market.

Pre-screening isn’t new. But it is, perhaps, becoming a lost art today when online deal platforms are easily accessed or casting a broad net through an e-mail blast touches a myriad of potential buyers or sellers. Individual preferences and investment parameters are often ignored or not factored in.

The good are quickly separated from the bad and ugly through an assessment and understanding of individual investment parameters that include: credit, asset types or industry preferences, geographical preferences, structures, pricing, dollar limits and maturities.

Understanding the parameters of each potential investor enables the seller to efficiently target the most likely candidates for a given transaction profile. The most effective means of keeping current with the market is through continuous communication or personal interaction with potential investors. Establishing and maintaining close relationships is critical for anyone on the buying or selling side of a transaction. In fact, the objective of PNC’s buy desk objectives is not to just get called about a transaction, but to be called first.

Unfortunately, ours is not a perfect world especially when market liquidity and demand far exceed the available transaction supply. This personal interaction is even more relevant today as lease and lease paper have become more portable. For the most part, these transactions are liquid investments, which are bought and sold like many other commodities. Of equal importance to the investment itself, is how an institution brings the opportunity to market and the content of the offering.

Understanding the needs of your market is one thing. Providing the market with a clear and concise offering memorandum that contains the key elements of a transaction is essential. An offering memorandum does not have to be as thick as the New York phone book, but it should be thorough. The offering memorandum will serve as the basis for making an informed investment decision. It is disappointing after verbally pre-screening a transaction to find the offering memorandum is lacking in information. Sometimes, a seller is unable to answer the basic questions about a transaction, which can indicate that the seller is not in control of the transaction or may be fishing for your economics.

Technology — Both Savior and Curse
While advances in information technology and the Internet have facilitated many aspects of our industry, it has also had a negative impact on efficiency. The benefit of simply attaching the offering memorandum in an e-mail and instantly delivering to the desktop of multiple potential buyers and sellers cannot be overlooked. This overwhelming amount of legal documents, financials, disclosure details, etc., traditionally were packaged and shipped at the earliest overnight to prospective investors. But one must be cautioned to still maintain the personal interaction. Send electronic offering memorandums only to those institutions that you have pre-screened and even called in advance. This may reduce the risk that all sellers worry about — is your deal really marketable? The familiarity of the parties and a thorough pre-screening effort provides knowledge that a particular deal fits an institution’s investment parameters. This initial communication may result in a “soft circle” of the deal — taking it off the market and working the deal in greater detail with one buyer. It is only through a high level of trust gained through personal interaction over a long period of time that such an arrangement can work in favor of all parties.

The other option now available to this industry through new technology is the wholesale marketing of deals through online deal platforms. The benefit of accessing a large volume of potential deals may certainly be valued by some. But resources must be committed to read through each offering to source perhaps one that fits an institution’s investment parameters. The time spent sorting through these deals has had a negative impact on the efficiency within the syndication industry.

Marry Technology with “Old School” Tactics”
The syndication market has evolved into a strategic tool that is being utilized by many companies to deliver immediate returns, mitigate risk and solidify customer relationships. Through the process, any one individual can be in the position of both a wary buyer one week and of auctioneer the next. The pace of the sale, the give and take of negotiating the purchase price and/or the documents, determining over time whose word can be taken and whose should be questioned are what makes syndications a challenge. The entire process of achieving some type of clarity with respect to relationships, communications, trust and the development of a negotiating style takes time and experience. The winners in the lease and loan syndication market will be those who understand the inefficiencies connected to certain technology and develop a technique that marries the new with the old, most importantly incorporating one of the oldest techniques of all … listening.

Robert Doyle is a vice president, PNC Equipment Finance, and manager of the syndications group. He is responsible for both the large ticket buy and the “general” sell desk. With PNC since 2001, Doyle has more than 30 years experience in the leasing and syndications industry. He can be reached at [email protected]

This was prepared for general information purposes only and is not intended as specific advice or recommendations. Any reliance upon this information is solely and exclusively at your own risk.