In the private placements world, syndicated deals are the “big fish” everybody is aiming for. Deal sizes, commissions, and the credibility boosts are much larger. The problem? So are their complexities and inefficiencies.
The core of this issue is that each syndicate member usually has their own internal processes for executing these private placement deals. These processes are also often manual and paper-based – something which can already bog down simpler, non-brokered deals.
Combine this lack of synchronization with legacy processes and you have a recipe for delayed deals, frustrated investors, and wasted resources. In this piece, we’ll explore three main ways this problematic combination can turn lucrative syndicated private placement opportunities into a process nightmare that your team dreads doing.
#1: Having to Mark Up Differing Subscription Document Formats
We all know just how complex a subscription document can get. In fact, that’s the reason why your institution likely has its own subscription document formatting that you’ve used for years and are familiar with. Given the number of different investor categories and exemptions that exist, this is common and understandable. But the problem arises when each syndicate member each has their own “customized” subscription document format.
Here's what we’ve seen: stacks of printed out documents, each plastered with brightly colored sticky notes denoting where investors should (and should not) sign. This is a patch over attempt to solve the issue that “works”. But it comes at the cost of lengthier deal processes, multiple back-and-forth with the investors, and burned-out staff mindlessly scrawling out “sign here” on sticky notepads.
#2: Having to Manually Update Deal Details in Individual Databases
The problem of different formats isn’t just limited to the documents themselves. It also extends into the “backend” of updating the deal’s details into each party’s individual databases. If the subscription documents are manual, then guess what? The database input step must be manual as well.
Plus, in a syndicated deal, you must contend with inputting the details from subscription documents from the other parties as well – meaning in unfamiliar formats. This lack of familiarity makes an already-slow process even slower. And this is not even mentioning that this part of the deal is essentially mindless data entry, an unnecessary waste of resources in today’s digital age.
#3: Having to Keep Track of Deal Progress via Emails and Phone Calls
Because legacy processes make each deal more complex and less synchronized, updates must also become more frequent. After all, without any sort of centralization, how else would each syndicate member be able to obtain the relevant details to pass on to their own stakeholders?
But not only do the updates have to be more frequent, they have to be done in the manual, old-school way as well – emails and phone calls. And while there is nothing wrong per se with these modes of communication, it is far from the most efficient path for what should be standardized deal updates.
The time cost of making such frequent updates manually can be significant. On top of that, there’s also the cost to the investor experience. The consumer world has trained us all to expect instantaneous, real-time updates. When this is denied, it leads to uncertainty and frustration that we are no longer comfortable with.
How Much in Hidden Opportunity Costs are These Seemingly Minor Things Costing You?
You’re likely very familiar with all three of the problems we described above. And you may also have probably thought that these are merely minor issues not worth disrupting the status quo for. Yes, it may not be the best, but it works (and “this is the way it’s always been done”) – so why change it?
But if you stop and really think about it on a deeper level, you would quickly realize that the opportunity costs are far from minor. There’s the cost of the wages paid to staff to perform unfulfilling work that would be better off automated. There’s the value of other work that such staff could be doing instead (and feel much more fulfilled doing so – improving employee retention metrics as well).
You also have to think about the number of syndicated deals you could complete in a year with more streamlined and automated processes. What is the opportunity cost from such foregone revenue? When you step back and look at the totality of it, the “true costs” could surprise you.
The Future of Syndicated Private Placements is a Streamlined, Interlinked Network
At Katipult, our view of how the syndicated private placements ecosystem would look like in the future is far different. We envision a robust, user-friendly, and interlinked network that allows for digitally synchronized efficiency. A network that will make the entire ecosystem more scalable and efficient, so that institutions can realize the full potential of syndicated private placements.
And we aren’t just envisioning it – we’re building it. Based on our market-leading software currently used by Tier-1 clients like Canaccord Genuity, Raymond James, Cormark Securities, Echelon Wealth Partners, and TSX Trust for non-brokered private placements, we’re helping push the entire ecosystem to the next level.
If you’d like to learn more about how we can help you, contact us to learn more.