Today’s post will focus on the analysis of mid-market capital providers, which I believe provides the most significant opportunity for companies seeking funding in today’s tight credit markets. If on one end of the spectrum you’ve recently been given the cold shoulder by a bulge bracket lender, or at the other end of the spectrum been rebuffed by a smaller financial player, you’re not alone. In the text that follows I’ll lead you to the pot of gold at the end of the rainbow…the mid-market capital providers.
The tightening of lending and investment guidelines all but have the smallest and largest capital providers sitting on the sidelines engaging on only the most coveted opportunities. In today’s market, small banks are hesitant to even come close to brushing up against loan-to-one restrictions, or maximum legal lending limits.
At the same time, bulge bracket players (the largest 10 investment banks – Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan Chase, Lehman Brothers, Merrill Lynch, Morgan Stanley, and UBS) are largely still licking their wounds. With only the rarest of exceptions, both ends of the capital markets are closed for new business.
This presents a veritable land grab scenario for the mid-market players who are not bashful about exploiting the opportunity afforded them by the absence of their smaller and larger competitors. The simple reality is that it is much easier to get a $50MM or $100MM deal done than it is to swim upstream with a $5BB dollar transaction or to swim downstream with a $5MM dollar play.
In addition to mid-market firms being well-capitalized, they are also stealing talent from the larger I-banks who have recently made tremendous cut-backs in staff. It is my opinion that what your seeing in the capital markets represents the perfect storm for companies whose capital needs sink up with mid-market underwriting guidelines.
Regardless of what level of the capital stack you’re looking to fund, focus your efforts on the mid-market investment banks, regional banks, private equity firms, hedge funds, and foreign banks. Who knows…maybe you can even attract a bulge bracket player who is slumming and wouldn’t ordinarily otherwise consider a smaller play but for current market conditions. Happy hunting…
