This week we chat with Tom Cassidy, Managing Director, US Bank. Mr. Cassidy is responsible for private equity Sponsor Finance Group originations and has been in the leveraged finance world for over thirty years. Before US Bank, he worked at JP Morgan Chase and at BNP Paribas.

The Lead Left:  Tom, you’ve had over three decades of experience in covering private equity sponsors. What are they telling you today about the deal environment? 

Tom Cassidy: It’s been a challenging year for deal flow, as a number of our Private Equity clients have not closed a new platform transaction this year. The main challenge is transactions are “priced to perfection” and at the current valuation multiples there is no room for portfolio company underperformance to achieve a satisfactory return. However, add-on activity by our PE clients continues to be strong.

TLL: Do you think the lack of economic growth has been a drag on PE investing?

TC: The targets we have reviewed are for the most part good companies that are performing well. However, PE clients are cautious with their critical operating assumptions given the low growth in many sectors of the economy. Thus it has been difficult for our clients to meet the sell-side asking price.

TLL: What kind of strategies are your clients employing to grow their businesses?

TC: A major theme we have seen is overcapitalizing new platforms to build the brand, broaden a regional distribution model to a national strategy and/or fund strategic add on acquisitions.