Where Technology Misses the Mark on Capital Deals

Technology is providing more data for capital sourcing, but it is also adding a layer of complexity to deals. As a result, there is an increasing need for seasoned professionals that can analyze the data and put together complex deals. This can also make it challenging for firms to adopt new technologies. Malcolm Davies of George Smith Partners says that the firm is incorporating more technology and developing technology tools internally while simultaneously focusing on internal talent and training.

“In one sense we are getting more technologies, but in another sense, things are getting much more complicated,” Davies, a principal and managing director at George Smith Partners, tells GlobeSt.com. “There is larger traunching being done in capital stacks. You don’t just have a lender and an equity partner. You are now seeing a lender, a B piece of that lender, a mezzanine piece of the stack, maybe even a preferred piece of the stack. That is all before the common equity part of the equation. In that sense we are really well positioned in the market because as it gets more complicated, the more you are going to need a really well proficient and well-knowledged capital advisor that understands structured finance.”

While many of the deals that come through the firm are highly complicated, Davies says that technology is useful for more commodity-drive transactions. “A lot of the deals that I work on are not what I would call commodity-driven trades,” he says. “I think in some sense that is where we are starting to see some dislocation with technology to really help what I would call commodity-driven financing. That is another reason that George Smith is really positioned well, not only now but going forward into the future.”

Regardless of the technology, Davies says that you need an experienced capital markets advisor to analyze the data and to build personal relationships to get a deal done. “We review more data than you could ever imagine,” he says. “Years ago we didn’t have that data, so it makes the world more knowledgeable, but it is what you do with the data. That is the most important part. We have brought in a lot of technology internally, but we are recognizing that individuals really do help drive transactions.”

Building relationships is integral, says Davies, and that is something that you don’t get with technology. “If you are a deal champion at one organization, we highly value that individual for their abilities to transact on deals,” says Davies. “So, we track not only organizations but we track individuals. Those individuals are the deal champions that make things happen. Our teams on the capital side are making sure those individuals are well supported to get investment committee approvals for our transactions. In that sense, the technology that we are using in-house is helping us to go to the next step in the world.”