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It's right between subordinate and senior salary/workload.
zing.
But seriously, theres an FAQ or interview on this site somewhere specifically dealing with mezz. Use search. It was very informative back when I read it.
umm isn't it because pe is private equity? and mezzanine is debt?
If they're lucky.
...we've been lucky on a few deals this year, lol.
Regards
Actually you're both right. Mezz can mean both debt and equity. The one or two Mezz shops I interviewed with love to spin the equity tale but in the end the majority of your time is evaluating cash flows and debt waterfalls rather than stuff like NI/EPS or the equity portion of the company. Of course the business model IS important, but you won't care about it in the same way a traditional PE shop would.
Official definition: "Mezzanine capital, in finance, refers to a subordinated debt or preferred equity instrument that represents a claim on a company's assets which is senior only to that of the common shares. Mezzanine financings can be structured either as debt (typically an unsecured and subordinated note) or preferred stock."
Mezz Fund - Details? vs. Working in PE? (For a call tmr, please help) (Originally Posted: 01/25/2011)
So I have an informational call with a sr. principal/MD (alumni) at a mezz fund coming up really soon (tmr). I have contacted a lot of alumni in PE over the years, and generally have some questions in mind for PE calls, but this is the first I've reached out to a mezz fund... I'd like to understand them better before going into the call like a big noob.
I was wondering if someone can tell me some differences b/w working in a mezz fund vs. PE. I know the differences of providing debt financing (w/ small equity slice) vs. PE as per (http://www.wallstreetoasis.com/forums/how-do-mezz-funds-make) but I'm curious about things such as - are there different factors or criteria a mezz guy would look at? Do they have different concerns? (e.g., in PE you obviously want the portfolio companies to be able to service debt, but the liability of the debt is on the company level and not the GP's so they aren't 'on the hook' and they can still draw out cash via dividend recaps... whereas a mezz fund providing junior capital is dependent on it being repaid - likely as a bullet amort + warrant, so debt capacity/service capabilities is a greater concern?) [please correct me if I'm completely off base]
And generally, what are the differences of working in mezz funds vs. PE at the analyst/associate level?
Thanks guys - appreciate it!
Shoot me a PM
Thanks Kenny - sent you a PM
Hi, would you be able to share what you heard from Kenny? I'm curious about this answer as well. Thanks.
Will send you a PM.
I'm really interested as well.
Deleted
Preferred equity is more similar to debt than it is to equity.
There is nothing wrong with working for a mezz fund. The guys I know seem to enjoy a good lifestyle and make decent pay. You definitely approach deals different though. It is more about downside protection than it is growth opportunity. Sure, mezz funds make equity investments, but they are typically extremely small. As mentioned above, the focus will be on cash flow and downside.
Is mezz fin considered PE? (Originally Posted: 12/01/2006)
Yes, but the strictly Mezzanine Finance firm is a dying breed.
I agree, it belongs in the broad category Private Equity category (includes: sponsors, VC, distressed debt, etc.).
Mezz finance is not private equity. To understand this you have to get back to the definition of private equity and mezzanine finance. Private equity is EQUITY investing and Mezz Finance is DEBT investing. Of course as a mezz lender you do receive an equity slice on most deals but a majority of their return comes from debt and interest payments which is the opposite of PE. As in comparing any fixed income and equity investment, a mezz lender does not have nearly as much risk nor as much upside potential.
I agree that only mezz finance is going downhill and most shops are getting closer to PE, but they are not the same in terms of risk/return yet.
Agreed on ambiguous definition, that said, mega funds (like Carlyle and such) have a mezz fund. They do similar due diligence as the PE group would. If you're worried about experience, don't worry, you'll do deals, issue term sheets, build models, etc. In terms of portfolio interaction, correct me if I'm wrong but there is none as mezz holders (obviously) don't sit on boards.
Some mezzanine financing deals have a debt portion and an equity portion in form of warrants (options), PIK, and convertible securities.
From a financier's prespective, MZ investments are very risky because in a bankruptcy proceeding, MZ funds are not entitled to any physical assests during liquidation, and the borrowers stock is typically used as collateral to secure mezanine financing.
Because of this risk and exposure, MZ investors typically command high yields returns (>15%), and they also have options, warrants, and convertible options to convert their debt into stock much later down the line, if they wish to participate in potential equity growth in the company.
Good examples of MZ funds are Summit Partners and TA Associates.
MZ typically look for an 18% IRR. PE are >25% which is what I was trying to state earlier. Good explanation Thad.
It depends there are RE Mezz funds out there with a lower return threshold
RE mezz funds? as in real estate mezz funds? what kind of returns are we talking about and do you have any examples?
Hi there - interested in TA Associates. Does anyone have info on the HK office?
Information on specific PE / Mezz Funds (Originally Posted: 01/28/2013)
Can anyone provide color on these firms? Through networking I have contacts at them and was wondering if anyone has worked with / for or interviewed with any of them. Any help is greatly appreciated.
NGP Technology Partners MCG Capital BIA Digital Partners Private Advisors The Grosvenor Funds
Thank you.
Find a few mezz funds websites, look at their investments and their senior folks' backgrounds. That'll give you a better sense for how they do. Also, the bigger the fund, the better the pay.
SB to anyone who has info on any of the above funds
Thank you, can you clarify what a publicly traded BDC is? i.e. is that a good opportunity out of banking at a BB in a good group in a non-NY location or would it be a step down?
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