Maybe it's you

15 May 2009

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It seems that for each bank claiming to be "open for business" there are at least two to three buyout houses retorting it's a load of hogwash. Indeed, of the mere 14 buyouts recorded in the UK in Q1, more than a third involved no banks. Despite this, your editor is told that a couple of banks (literally two) are road-showing to announce they have liquidity and sponsors should partner with them

In fact, unquote" spoke with a corporate financier that was seeking legal advice over a lender "refusing to back a deal, despite earlier indications that it was on board." Initially disgruntled by the apparent change of tune, the corporate financier later learned that the lender actually decided to turn the deal down "because the sponsor was not on (their) list of preferred partners". And just like that, the corporate financier went from distressed to impressed.

It would thus seem all the talk of "relationship banking" and "track record" is more than just rhetoric. And it should be: banks are necessarily more concerned with recouping capital than increasing market share nowadays, so assessing which sponsors they've lost money with - and which now have further funds to support portfolios - is of utmost importance.

But it's not just at the firm level. Some banks are even diligencing individuals at the firms they back, since people come and go. Take for example the widely publicised Terra Firma buyout of EMI, which saw the buyout house work closely with its long-time ally Citigroup in 2007. But since the deal hit troubles (Citigroup was unable to syndicate the debt after the markets imploded), the lead deal doers left, including Riaz Punja, who had led for Terra Firma, and Michael Klein, head of i-banking at Citigroup. Even Guy Hands has taken a step back from the operations at the firm he founded. Such moves go a way to illustrating that it's no longer just about partnering with brands, but with people. It will be interesting to see whom Terra Firma partners with for its next deal (it is currently looking closely at AIG's aircraft leasing business).

So if you feel sour grapes about banks' apparent contradiction in what they say and what they do, perhaps it is time to re-assess your own track record, both at the firm and individual level.

Yours sincerely,

Kimberly Romaine

Editor-in-chief, unquote"

Tel: +44 20 7004 7526

kimberly.romaine@incisivemedia.com.