Bain Capital Credit’s head of private credit Mike Ewald talks to Mergers & Acquisitions about his funds’ sweet spots, the outlook for credit providers, and the state of play in a frothy dealmaking environment. “The financing market has become more efficient,” he says.

Bain remains focused on its sweet spot: companies with $25 million to $75 million in earnings before interest, depreciation, and amortization that “have a business that’s niche enough it won’t ebb and flow,” Ewald says. “These are more nimble. They can expand geographically. They might be family owned and have customer concentration issues. Those are the issues in that market.”

Though many credit providers talk about proprietary deal sourcing networks, Ewald is skeptical of the concept in the core middle market where Bain plays. Sponsor-backed companies benefit from their owners’ networks. “It’s hard if you’re in the core middle market to claim you have proprietary deal flow because sponsors are more sophisticated,” says Ewald. “They now have their own capital markets function.”

Even in the lower middle market where companies might not have sponsor backing, potential issuers are savvy enough to hire a debt-focused investment banks like Lincoln International, Houlihan Lokey, or Baird to generate multiple offers.

Instead, Bain Capital Credit’s value proposition is certainty, speed, and sector knowledge. “We have a large syndicated business that has industry research. I can talk to that team and understand regulatory play, industry acronyms, customers, suppliers,” says Ewald. That depth of knowledge means that on top of the standard ten questions posed to potential lenders, “I can go to the sponsor and say these are answers 11-20.”

Market froth or not, the firm, like others, remains focused on its core business and delivering on its own investment criteria. “We look at 700 deals a year, and we close a single digit percentage of those, so you’ve got to kiss a lot of proverbial frogs,” Ewald says. “It’s hard to do that on a proprietary basis.”

-Brandon Zero