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CommentLeader

Running your own club

PE firms need to staff up to run their own fund clubs

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Private equity firms are increasingly relying on clubs of direct lenders to finance their biggest buyouts.

Some believe this is just a passing trend, while others point to the endurance of the model in the US as proof that it is the logical development of the market.

Either way it’s not good news for levfin bankers that are being at least temporarily disintermediated by private equity firms.

Sometimes they might use a debt advisor, or retain an investment bank to help out with the logistics of corralling all the private debt funds and managing the relationships. But for the larger sponsors it’s usually possible to do that entirely in-house.

Many PE firms have hired bankers over the years in with titles like head of capital markets to look over the financing in their portfolios, although they usually pass off the actual execution to a third party. But if this is really the new normal why not bring the entire syndicate function in house?

A small team under the head of capital markets could easily manage this themselves, and would likely be more cost effective than hiring advisors every time. Not to mention that there must now be plenty of levfin bankers without much to do that would eagerly take their call.

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