For those investment or lending folks out there, it would be great to hear how your IC processes work and what sort of materials are prepared along the way. Below is a template that could make this an informative discussion if we get a couple of contributors to fill.
Firm Type: REPE Product: LP Common equity, preferred equity, and sub-debt Investment Process: (i) desktop u/w, and initial DD, (ii) initial IC meeting/approval, (iii) LOI/term sheet, (iv) conduct DD, (v) final IC meeting for final approvals to close/fund IC Materials: (i) initial meeting: 10-20 page memo, (ii) final meeting: 35-70 page memo (depending on product type / deal complexity
Bump.
This seems interesting to me since I have no idea what goes on.
Bump. Any info would be appreciated.
bump
Firm: Private Credit Product: Underwrite 1L/2L/Unitranche loans for PE Sponsors, will take a small hold and sell majority of the credit to market/other debt funds. Generally we’ll have a small ($5M) equity hold too. Investment Committee: deal team will create a single investment memo (15-30 pages typically, more or less occasionally) and pitch it to the investment committee in about 20ish minutes. IC reads over the memo(s) the day before and has questions prepared. Deal team doesn’t go to IC until done with DD, unless they think it will get shot down easily then they may do a fly-by with IC earlier in the process.
Previous Firm: Private Credit (smaller shop) Product: same as above but also a small direct lending platform IC Process: One page deal screen (transaction strengths/risks, business overview, etc.) presented to IC, discussed for about 30 minutes. Then more DD, then create an early read memo (20-30 pages), pitch to IC for about 1 hour, mas DD, then create a final investment memo (40+ pages) pitch for 1 hour +, then invest.
TL;DR: current firm is better with the lean process, is a Tier 1A Private Credit shop, makes way more money. Prior firm was more like a Tier 3 shop, not a bad place at all though. Both firms survived the previous financial crisis and imo will survive the next one too.
Firm Type: Lender
Product: Senior loans (construction, term, subscription lines, revolvers)
Investment Process:
(i) initial due diligence and underwriting. Write a 5-15 page memo (depends on the complexity),
(ii) initial IC meeting/approval,
(iii) LOI/term sheet,
(iv) in depth due diligence which includes getting third party reports (appraisals, property condition reports, construction cost analysis, construction budget analysis, environmental reports, insurance, flood insurance) and writing a more thorough 10-20 page memo,
(v) final IC meeting for final approvals to close/fund
I could provide info on the developer (sponsor side) which is a bit different.
Out of curiosity...if there’s a 20+ page memo...how many of those pages are just sheets from the pro forma?
We would send out a ~30 page packet. ~15 pages were narrative and ~15 were pro forma or exhibits.
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