Posted on: July 8th, 2019

deal cadence

Deals are complicated projects with various steps by various people progressing at different rates. Some steps are within the control of the parties and some are not. Time frames are set early on in the process, yet are rarely achieved unless there is active management along the way. All deals want to close quickly but only deals employing the use of deal cadence can make a quick close happen.

Deal cadence describes the process of bring rhythmical flow to the entire process, to accelerate the timeline. With positive deal cadence, suppliers and consumers of information sync up more easily, and engage more fully and solving each other’s needs. Due diligence processes are often plagued by information overload and overly rigid information expectations. Lenders submit long lists which have to be satisfied by the borrower. This often happens in a vacuum without anyone providing high level navigational guidance to the lender. Often the diligence person, with no prior borrower understanding, is jumping into the process cold.

Each deal needs a strong deal cadence manager to fill in the blanks and allow each party to see the other party more clearly. Diligence is an informational exercise that educates the lender on the important parts of the business.It is always a good idea to connect early with the diligence party and give them an overview of the business. By becoming an informational ally and knowledgeable resource, you are in a position to earn their trust and guide their diligence process.

Delivering cadence involves looking at each subsection of diligence and figuring out up front what each party needs to do. In some instances, the lender needs to be told their scope is too vast and needs to be sharpened. In some cases, the company needs to create new reports and information for the lenders. Through applying foreknowledge to the process, a deal cadence marker brings efficiency to what is inherently an inefficient exercise. A large part of cadence is ensuring that the information provided is relevant and high quality to the lender’s request. Here are the Attract Capital 4 Big Wins from Deal Cadence.

Close more quickly – with proper cadence, you lose less time and have less redo’s than the average diligence process. Time is the #1 enemy for all deals, so the faster you move, the greater the likelihood of closing.
Builds Proper Knowledge Base for Lender – When lender’s get the right information in an efficient process, they become smart. This enables them to be a good partner to the company throughout the lending relationship.
Higher Likelihood of Close – deals without cadence fail at higher rates. When a deal fails, it not only costs a great deal of time and money but can profoundly affect morale in a negative way.
Creates Internal Transactional Efficiency – companies that provide deal cadence have elevated capital raising processes that allow them to raise capital and make acquisitions more efficiently.

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.

The 4 Big Wins from Deal Cadence