How fast are deal sprints in credit?
Upon receiving materials and access to data room how fast do you have to get up to speed on a business, build out the model ? Has there often been 1-2 week deal sprints ?
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Deal sprints in credit can be intense and fast-paced. Based on the most helpful WSO content, the timeline for getting up to speed on a business and building out a model can vary depending on the complexity of the deal and the urgency of the process.
Typically, you are expected to quickly analyze the materials and data room contents, often within a few days. Building out a model efficiently is crucial, and while you might rely on banker or management models early on to save time, you still need to plan ahead and manage the process effectively.
As for 1-2 week deal sprints, they are not uncommon. These short timelines require you to focus on the essentials, such as understanding the business, analyzing the credit/sponsor, and evaluating the business plan. The ability to prioritize and take shortcuts where appropriate becomes a critical skill as you gain experience.
Sources: Financial modelling on the buyside, Development vs Acquisitions Lifestyle, What's happening during live deals?, The Truth about "Hours" at the Analyst Level, Q&A: 30 Year-Old Breaking In, Part II - From tiny M&A boutique to Distressed Debt
Depends on the credit agreement for the most part. If the CA isn't heavily negotiated and the relationship is good, and lawyers are not going to spend 10,000 hours, you can usually get it done pretty quick, 4-5 days. But those processes suck and its constant banking hours. Those aren't the norm. Usually its 2-3 weeks.
How much time would be spent on diligencing the business ?
Well I mean all businesses fit the same relative criteria for credit investments. On the operations front: (i) sustainable and consistent cash flows, (ii) a barrier to entry, (iii) low customer concentration. On the valuation front: (i) low LTV, (ii) Low Debt/EBITDA, (iii) pricing appropriate for the risk it has. You understand how KPI's drive revenue and costs, the affiliated risks and benefits, and then you make the decision. Its not all that much so it can be done. And ofc, modeling but usually the modeling doesn't have to be too much.
And all that has to be done in 1 week or 2-3 weeks? How do you operate that quickly and get up to speed on the industry / business / KPIs so fast?
Well you get all the basic transaction stuff out of the way first because its low hanging fruit. The hardest thing is understanding how the company operates on a fundamental level (which is what you're asking.) There's a few ways you can look at a Company outside of the CIM (which would be available in a banked process). Normally the CIM will have everything you normally need to get a decent idea on what the bankers were focusing on (which is generally helpful albeit always salesy)
(i) You can look at what other deals the team has looked at.
(ii) You can look at public comps, see how they fundamentally function, risks, etc.
(iii) You can talk to people in the industry, equity researchers, etc. to make your opinion on what is going on and whether you think the market overall is good and the position of the Company in the market is good.
Remember that (especially in this business) you are rarely ever starting from 0. There has always been some work before people are going to be asking for hundreds of millions from you. Datarooms can be annoying because Companies (and their ibanks) love to flood it with data you don't really need. Knowing that metal commodities affect the COGs of a steel processing plant isn't that hard of a leap. Most of the key parts of a business are generally easy to understand. And if they're not, that's why you can ask questions to management etc.
Also, most 150+pg CIMs are done within a few days, its not that different writing a IC memo (although you will care less about formatting).
You’ll usually have people in your team that are familiar with the business model already, and layer that on with a combination of parsing the CIM / LP, doing banker calls, sending over question lists to bankers, and doing management calls. You don’t need to understand every nuance of the business to submit a non binding sheet, especially if you’ve got low LTV / low leverage and high FCCR on a fundamentally good business.
Opportunistic / hairy deals are often different though.
Depends on what part of the market you play in but most vanilla UMM and even many vanilla MM deals tend to be sprints (ie provide feedback in a few days and commitment papers in two weeks or less). Sponsor DL is a volume business where you churn out deals.
But it’s not particularly difficult is it ? I assume most models are the same template ? Or is it better to do MF PE and not be churning through volume if it takes me more time than average to digest information
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