Posted on: June 25th, 2018
Mezzanine financing professionals have diverse backgrounds across a range of disciplines. Usually a mezzanine fund is formed by a high performing banker or investment banker who has strong deal flow and institutional connections. Because mezzanine financing requires a more demanding form of analysis and underwriting, it usually attracts talented professionals who have both financial acumen and business judgment. While strong analytical skills will take you far, the best mezzanine lenders have a holistic skill set which includes interpersonal skills, deep thinking, communication and salesmanship. In many ways, mezzanine lending is as much an art as a science and requires high level free thinking and discernment. For example, one of the most important decisions is in assessing the quality of a management team. This requires a high EQ as opposed to a high IQ, and is usually a job for the more seasoned members of the team. The senior members of the team, such as Partners and Managing Directors, usually have 10 to 15 years in banking, investment banking or consulting. Their formative experiences center around engaging directly with middle market companies who are growing, acquiring or restructuring. This gives them an understanding of the pain points of clients and the most effective ways to communicate with them. The mid-level members of the team are Vice Presidents or Directors and usually have 5 to 10 years of experience. Many of them have worked at large commercial banks or investment banks previously where they had experience with larger Wall Street size deals. The most junior level members are called associates and analysts. They do the number crunching and other more mundane aspects of deal processing.
Each fund has its own culture formed by the backgrounds, values and lending experiences of the team. The key in dealing with a mezzanine fund is to quickly grasp the preferences and the decision making dynamics of the fund. Each fund is different in terms of their risk tolerance, deal types and industry preferences. By gaining a greater understanding of the people of the firm, you can unique insight as to whether the fund is a good fit for you. Here are 4 ways you can do this.
Review the industry backgrounds of the Fund Principals
Each principal has a linked in page that describes their prior experience and their successes. Often, this information provides clues as to the investment preferences of their current fund.
Learn the Principals’ role at the fund
Some principals are credit officers, some are deal flow rainmakers and some are portfolio managers. Try to learn how the organization is set up and who the most important decision makers are. This will guide you as to whether you are speaking to the right person.
Learn the Fund’s deal process
Some funds are well constructed organizations with efficient processes whereas others are a group of talented individual contributors with little organizational structure. You are likely to get better feedback if they have an established, systematic process.
Review the fund’s portfolio and press releases
A cursory review of this will reveal whether or not they have invested in a company like yours. Their industry preferences are usually well articulated on the web site as well.