Growing competitiveness in the buyout market is resulting in a variety of pressure points being applied by private equity sponsors to the lenders who finance their deals.

Lines are blurring in the steps between buyers and financing sources – term sheet to commitment letters to credit agreement. Today, corporate finance attorneys tell us, a detailed term sheet is attached to a definitive “no-outs” commitment.

“Minimal conditionality is fundamental to what’s now being asked of lenders,” one reported. “It syncs with conditions being required in the acquisition agreement. There’s also assurance to the seller that the buyer’s financing terms have been negotiated and are subject to limited conditionality.

To prevent misunderstandings with their lenders down the road, private equity sponsors seek to iron out most of the major negotiation of terms up front. In large part, while the scope of items like negative covenant exceptions, “baskets” and carve-outs may not be complete, the goal is to have as few outstanding points as possible.