Posted on: February 27th, 2018

art of deal articulation Today’s deal world is a digital platform driven, data room-centered experience with vast amounts of information available at a moment’s notice. As we connect with more people, and information is more plentiful, it seems we are a bit inundated with quantity of data as opposed to quality.

Lost in the firehose of data is the story line of the deal, the who is doing what to whom and why?

Story lines are key to creating strong imprints on lenders and investors, as they provide a relatable and easy way for them to grasp the deal. Story lines allow you to efficiently educate your lender/investor audience.

They’re also a tool to maintain their focus and sustain their interest in doing the deal. In short, the more compelling and coherent the story line articulation, the better your chances of having a successful closing.

Most lenders classify business strategies into certain patterns. Razor-razor blade, land grab market opportunity, large book of recurring revenue, migrating up the food chain, buy & build are a few of the archetypal examples.

When you use these tools as a story line for your deal, it helps lenders see it in a familiar light that they have prior experience with. Deal articulation has become more difficult as the standard format for conveying information has transitioned to PowerPoint from word document based CIM’s.

When you have to build a comprehensive prose-based CIM with a story line, you require deep understanding of the underlying business and its points of specialization. The process of constructing a prose-based CIM forces high level thinking on the part of the author.

The result is better articulation of the story line and deal strengths, filtered through custom frameworks that highlight the uniqueness of the company. Deal articulation brings the following benefits:

More persuasive and resonant way to convey information – a well-articulated prose-based CIM will make a statistical and subjective case as to the strengths of the company. It has the ability to frame important parts of the story more effectively.
Control of the narrative structure – A prose based CIM allows the author to dictate the best way to tell the story. Often, PowerPoints rely on regurgitated financial info to explain the business. Numbers are important but cannot tell the whole story.
Highlights the most important information – PowerPoint presentations make a hash out of prioritizing information, and often commingle highly important info with superfluous information. Well-articulated deals anticipate and lead the reader to the most salient information.
Allows for ease of deal socialization – all lenders/investors need to familiarize themselves with the deal in their shops and socialize the deal. A strongly articulated deal is easier to understand, making it easier for people to discuss intelligently at early stages in the deal process.

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 Art of Deal Articulation