How we prepared a deal summary for a Private Credit firm and provided a recommendation for a target company

March 16, 2023

The Context

The client, a Private Credit firm, wanted the TresVista Team to conduct a high-level deal read on the borrower with the help of the Confidential Information Memorandum (CIM) and recommend if the client should pass the deal or move to Phase 1 for further diligence.

The Objective

To create a brief summary describing the business, the economic model, investment highlights, risks & mitigants, key due diligence items, and provide a recommendation with the help of the CIM provided by the client.

The Approach

The TresVista Team worked on the following points to arrive at a recommendation for the client:

  • Looked for trends in historical KPIs and flagged inconsistencies
  • Highlighted any efforts taken by management to reduce costs
  • Understanding product or service economics (how the company earns its dollars)
  • Checked for attrition levels amongst customers, the cost for acquiring new customers, and the payback period
  • Flagged any cash-burning activities (Capex, R&D, etc.)
  • Looked for any technological and regulatory risks (competition, government, etc.)

The Challenges We Overcame

The hurdles faced by the TresVista Team were understanding various businesses only through the CIM summary and keeping away the marketing noise to arrive at a reasonable conclusion.

The Takeaways

  • Understanding the important parameters to look in a business from a credit perspective
  • Types of risks faced by the industry that may affect the cash flow or the lender’s ability to carve out their capital in case of a default

Final Product (Sanitized)

The Value Add – Catalyzing the Client’s Impact

By avoiding the marketing fluff, the TresVista Team provided a concise description of the business and highlighted the key financial KPIs, gave an overview of risks / merits of the deal, and suggested further due diligence questions, which helped the client to frame the next call with the borrower. The task helps save crucial time by passing deals that were not relevant and enables the client to screen through more deals and focus on the more important ones.