As a private equity borrower in the ever-changing healthcare field, you have leverage in your deals with lenders.
Penny Zacharias, Clayton Stallbaumer, and Ying Hsu are all partners in McGuireWoods’ debt finance group. They regularly work on sponsor-backed lending transactions in the healthcare space, and are particularly familiar with the borrower side of the equation.
To these experts, if you’re a private equity borrower in this field, the most important tool at your disposal is communication — and staying organized.
“Look at the long-term and think of this as a relationship,” Clayton says. “We've seen private equity firms and their portfolio company borrowers have a lot of success when they frame their communications in a way that is honest, but benefits them.”
If you are looking for funding in an innovative field like healthcare, you’ll want to be able to feel like there’s room for change. Better communication at the outset of the credit facility will enable more flexibility down the line.
And have a system for all those documents. Ying says that organizations doing complex healthcare deals should make sure they have all their paperwork together, and get all the needed signatures in advance where possible, so they can get the deal passed efficiently. There should be no surprises the night before you close.
Tune into the episode to hear from these debt financing professionals about how you can form great relationships with your lenders and keep your finger on the pulse of the borrowing landscape, to make sure you’re getting the best deal.
Name: Penny Zacharias
What she does: Penny is a partner in the debt finance group at McGuireWoods, where she draws on her 15 years of legal experience to represent financial institutions in a broad range of lending transactions. She is also the co-chair of the company’s Women in Private Equity & Finance Initiative.
Words of wisdom: “Thinking of your lender as a partner will afford a greater level of flexibility in negotiating from the outset.”
Name: Ying Hsu
What she does: Ying is a partner in the debt finance group at McGuireWoods, working in ABL and healthcare. She also serves as the deputy co-chair of the Women Lawyers Network of McGuireWoods’ Chicago office.
Words of wisdom: “Nothing beats being hyper-organized about closing deliverables when it comes to making the process go as smoothly as possible.”
Name: Clayton Stallbaumer
What he does: Clayton is a partner in the debt finance group at McGuireWoods, representing agents, lenders, borrowers, private-equity firms, and debt funds in a range of lending transactions.
Words of wisdom: “A little bit of good faith goes a long way in strengthening those borrower-lender relationships.”
Top takeaways from this Across the Table episode
★ There’s an art to the borrower-lender relationship. Penny, Clayton, and Ying all say that you cannot overstate the importance of a good relationship between a borrower and lender, especially in the healthcare investment space. Clear communication and transparency are essential for successful deals.
★ Make room for flexibility from the start. Before signing a credit facility, a borrower should make sure all parties are on the same page about growth trajectory and add-on acquisitions. As a borrower, you want to make sure that you have some wiggle room to grow and change, without catching your lender by surprise.
★ Borrowers have some leverage. Ying, Penny, and Clayton all encourage borrowers to use the leverage they have in a favorable market to get the deals of their dreams. Remember that power, and use it wisely, instead of grasping at straws from lenders.
[03:02] The swinging pendulum: Penny discusses how leverage between the borrower and lender changes depending on the lending environment. Right now, it’s a competitive market, giving borrowers extra power to get good deals.
[04:50] Work on your relationship: Clayton talks about how private equity borrowers can rethink their transactions with their lender partners, to build a mutually beneficial long-term relationship.
[06:45] Good faith and judgment: Clayton says that as long as borrowers are negotiating in good faith, taking an honest look at their business, that borrower-lender relationship can continue to thrive.
[09:29] Communication is key: Penny points out that if you prioritize communication and flexibility before you sign the credit facility, it will save you trouble down the line.
[12:10] Stay organized: Ying talks about the importance of keeping hyper-organized when it comes to deliverables, especially in a complex healthcare deal. Meet your closing requirements and get all the documents in order, and you can keep legal fees at a minimum.
[14:09] Keep on top of the cash: Ying says that in healthcare deals, knowing your lender’s cash management requirements can help eliminate roadblocks on the way to closing your deal.
[14:54] History matters: Clayton says a lender who is familiar with a private equity firm and has a history of successful transactions with them has more flexibility in their deals. Building up that positive pattern takes strong communication skills and time.
[17:36] Time to refinance: Ying, Penny, and Clayton all reflect on the ways borrowers can determine that it’s time to refinance, and how to decide when and if they need to change lenders.
Subscribe to Across the Table in your preferred podcast app so that you never miss an episode.
This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.