There are a lot of interesting dynamics going on in private equity right now. For example, there is a such a demand for fundraising, that PE firms are starting to say no to LPs during fund formation. But another trend has caught my attention. I’m working on the upcoming Mergers & Acquisitions October cover story on lending, and I’ve been thinking a lot about direct lending and what it means to private equity firms, investment banks, and other lenders.
Thoma Bravo’s $6.6 billion deal for Stamps.com is a good case in point. Our senior reporter Brandon Zero talked to Churchill Asset Management co-head of senior lending Randy Schwimmer, and he sees private credit taking “significant” market share from banks.
“To be successful, the syndication process depends on the arranger’s read of the market clearing price,” Schwimmer previously told Mergers & Acquisitions. “But they also rely on pricing flex in case the market moves. That uncertainty goes away with a private credit execution because the asset manager will hold the whole deal.”
But for me, this further begs the question of what does this mean for leveraged buyouts moving forward? Will this change the whole way mega deals get financed? And are investment banks and other traditional lenders starting to lose out?
“We win deals, we lose deals,” Ted Koenig, CEO, Monroe Capital previously told us. “We try to be creative. We try to custom tailor solutions for clients. We got a lot of specialization areas. We try to do things the right way with our lending partners and our sponsors. You can’t be in the business for 20 years and not do things and not have the right attitude.”
What are your thoughts on this topic? If you’re a private equity pro, investment bank or lender affected by the direct loan trend, I’d like to talk to you for the cover story. Please email me at: [email protected].
– Demitri Diakantonis