Capital Markets Corner: How To Be The Buyer A Syndicator Calls First

by Scott Kiley Monitor 100 2024
Want to be the first buyer on a syndicator’s call list? Scott Kiley shares how to make that happen by embracing the three Rs: relationship, responsiveness and reliability.

Scott Kiley,
Capital Markets Expert,

The answer to this question relies on your willingness to develop and enthusiastically embrace the three Rs: relationship, responsiveness and reliability. Your relationship with a syndicator can be strictly business or more personal — preferably both. Forming a strong personal relationship with a syndicator doesn’t require the help of anyone else in your organization. It’s all up to you and your interpersonal skills. However, developing a long-lasting business relationship does require a strong supporting cast.

Here’s a tip: You can’t establish a strong business relationship without being responsive and reliable.

The benefits of forming a personal relationship with a syndicator means you will get more swings at the plate and a tie probably goes your way. Be intentional every time you interact with a syndicator to deepen your personal relationship by not talking business. Find common interests and figure out how to make a deeper connection. As I think back on the personal relationships I established with many syndicators over the years, sometimes you just click with somebody right away. Other times, it took many years to develop a deep personal relationship. In person visits are far more powerful than e-mail or phone communication. One thing is certain: the more times you interact with someone exponentially increases the chances of creating that personal bond.

A strong business relationship may be all you need to get your share of business from a particular syndicator. Don’t be discouraged if you never establish a great personal relationship because business is business. In other words, a syndicator’s job is to get a deal sold. If you and your company offer the best or most efficient solution to achieve that goal, the business relationship will prosper. Where a personal relationship can be formed rather quickly, a strong business relationship is formed over time by completing many deals together.

A business relationship is also impacted, positively or negatively, throughout the lifecycle of a deal. In the bank capital markets space, the originating bank retains servicing. How you and your organization work through events such as an early lease termination request or an end of term FMV negotiation, can have a major impact on the relationship. A buyer, and their company, must treat these types of interactions like their own customers and be reasonable. Yes, the lease documentation provides the roadmap, but sometimes you must go outside the four corners of the contract to reach a solution that works for everyone. A buyer must stay involved in these interactions and not blame their operations or asset management group when issues arise. Take ownership of your deal from booking to termination.

Moving on to the second R. Being responsive is totally in your control and the easiest way to strengthen a business relationship. Over the more than 20 years I bought paper, I was very intentional about being responsive. When a syndicator sent me a new deal, my goal was to reach out (preferably by phone) within 24 hours. I acknowledged receiving the deal and always asked a few clarifying questions to let them know I had dug into the term sheet and memorandum.

Before the call, I would independently find out about any current (or past) exposure, the nature of the current relationship (i.e. is it a bank and/or equipment finance relationship), note the current PD (probability of default) ratings, assess whether the economics were in the wheelhouse and determine whether an immediate showstopper existed. A quick ‘no’ was very much appreciated. A long ‘no’ in this industry can be a death blow to a relationship. If your initial deal screening is positive, share your opinion right away but articulate next steps and estimated timeline.

Being responsive to the needs of your internal stakeholders is just as important. Your asset folks may need more detailed information about the equipment or its usage. Your credit folks may have some additional questions not covered in the memorandum. It’s your job to make sure those questions are relevant and reasonable to ask, and to motivate the syndicator to get them answered. Remember, all things being equal, if one buyer asks 15 questions, and another buyer has three questions, guess who the syndicator will put their saddle on?

Being responsive means keeping the ball moving internally so your organization concludes quickly on whether to pursue a deal. Speed is everything in this business. There were many times where I would circle up a deal within a few days, and the syndicator would award the deal to me, mentioning that they had not yet heard from many buyers who also received the deal. Again, responsiveness is totally in your control. Don’t wait to have all the answers to give feedback. Keep the syndicator engaged.

The term “circle up” is used often in our industry and it speaks to both responsiveness and reliability. There are “soft circles” where there is no formal credit approval, but you convey to the syndicator that the deal has successfully gone through pre-screens. I always felt transparency was your friend. Let them know exactly which hurdles have already been overcome and which hurdles remain. More importantly, keep them updated on the timing to get formal credit approval.

Being able to provide a soft circle quickly is the hallmark of being responsive. Converting that soft circle to a hard circle (or a credit approval) is how you earn the third R — your reliability stripes. Please know that a hard circle rarely means issuing a commitment letter. It still amazes me that billions of dollars of paper are traded each year without commitment letters. In the 20 years I bought paper, I only issued one commitment letter. Issuing formal commitment letters is no small task at most banks. More importantly, banks will assess an internal capital charge if you want to issue a commitment letter, and you will need to boost your pricing to cover that charge. But let me be clear. Even though you aren’t issuing commitment letters, when you give a hard circle on a deal and you don’t come through, the damage to the relationship is immediate and potentially permanent.

So, what does it take to be confident in giving a soft circle on a deal, and to follow that up in short order with a hard circle? It takes a great supporting cast as I stated in my opening paragraph. You need immediate access to a seasoned credit person (who may not be the ultimate approver) and an asset management person to talk through the deal within 24 to 48 hours of receiving a package. I know this doesn’t happen at a lot of buy shops, but the successful ones understand the importance of early involvement of senior credit and asset personnel. That doesn’t mean the buyer can just lob a deal into credit and say, “What do you think?” A future article will focus on the importance of the buyer having strong credit skills and being the first line of defense.

You can only establish a reputation of being reliable if your team is able to close deals efficiently and professionally. This speaks directly to the quality of your closing team, but you need to stay involved and provide them with support. I know a lot of buyers who think their job ends after they get a credit approval. In a perfect world, your closer will work directly with their closer to get a deal funded with no hiccups. In the real world, issues come up and a buyer needs to be ready to intervene to smooth out ruffled feathers if necessary. If you are as lucky as I was, you work for a company that understands the importance of getting a deal closed with little drama and on time.

In conclusion, you want to be the buyer who a syndicator calls first on a new deal. Having a personal relationship with a syndicator may get you that call. However, I believe developing a strong business relationship that is built on the pillars of responsiveness and reliability will get you that call. •

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.

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