The Overlooked Value of Working With a Fund Sponsored by a Big Bank

The lower middle market is filled with boutique investment banks that deliver high-quality intermediation for corporations. Funds sponsored by bigger banks, however, have certain advantages that others can’t deliver on.

We talked to Michael Scarangella at Morgan Stanley Credit Partners, a $1 billion mezzanine debt fund focused on the middle market, to learn a bit more about the often overlooked considerations for CEOs contemplating taking on debt.

Organization

Bank-sponsored funds with industry vertical orientation can dedicate highly qualified teams to your organization and ensure that, as CEO, you will be working with a seasoned professional as your point of contact. Having someone who understands both the day-to-day and long-term challenges and opportunities within a certain industry is an advantage. When evaluating a potential partner, industry expertise and firm organization shouldn’t be overlooked.

Speed

Bank-sponsored funds have the ability to move quickly thanks to their sponsor’s deep resources. “From initial research to due diligence, our team of analysts can spend more time getting into the details upfront, rather than having to outsource support or conduct research on an ad-hoc basis,” said Scarangella. This saves valuable time later in the process and often allows them to be highly responsive to the CEO throughout the transaction process. When it comes to making acquisitions in particular, speed and delivery can be the difference between a deal that closes and one that does not. Make sure you discuss speed and timeline before choosing a financial partner.

International Orientation

If you’re looking to grow across borders, aligning with a bank-sponsored fund that has international relationships can be extremely meaningful for your business. From supplier relationships to customer relationships (new business) in different markets, funds sponsored by large banks have the ability to explore international growth opportunities with ease. Even if your current plans don’t include expansion, ask your financial partner about options for long-term growth.

Network

As CEO, it is important to have a people-focused partner to lean on. Larger financial institutions aren’t new to the business and will typically have an impressive Rolodex to show for it. For example, if your CFO leaves, you can rely on a bank-sponsored fund like Morgan Stanley Credit Partners to be in a better position to put candidates in front of you that not only have expertise but are pre-vetted — instead of hiring corporate staffing agencies to find a replacement. This network will also provide access to world-class Fixed Income and Equity Research Teams for their transactions as well as connections to the Wealth Management division.

Resources

A bank-sponsored fund will have had experience with a wide range of transactions and therefore plenty of resources to draw up on that can make a significant difference for your company. For example, Morgan Stanley Credit Partners uses assessments that give its portfolio companies reliable insights into fundamental credit analysis, valuation, absolute and relative return and capital structure. Additionally, being a CEO under a Morgan Stanley-sponsored fund gives you the leverage and expertise to access better rates on things like phones, overnight shipping, travel, and office supplies through contracts that ensure your company isn’t overpaying for necessary resources. These kinds of discounts not only help to streamline your operations but can create meaningful liquidity opportunities as well.