Source Talks is a series where we discuss deal origination with PE and M&A pros, in collaboration with David M. Toll.

In this episode David speaks with Tom Aronson, Managing Director and Head of Originations at Monroe Capital, about the Covid-induced change in pricing and leverage multiples, the accelerating digital shift in recurring revenue model firms, and the role of technology in their deal origination operations.

Machine generated transcript below:

Start off by telling us more about Monroe Capital and about your role there.

Sure, Monroe Capital is a private debt fund. We started the fund in 2004 with a little over nine billion in assets under management, we provide unit tranche financing to companies that are generally five to thirty five million dollars of EBITA across many different sectors. And I was one of the co-founders of the firm in 2004. And I head up our front end or originations efforts for deals that are getting done.

What’s pricing and what are leverage multiples like compared to the pre-Covid times?

When covid hit, you had an immediate spike in pricing from the lenders. So that meant that pricing probably went up three fifty to five hundred basis points. And that was in that early March through kind of May timeframe. What’s interesting now is it’s worked itself back to maybe were about one hundred basis points wide or higher than we were pre-covid level. Certainly the leverage has come down a little bit as well. So we’re probably a term turn and a half less leverage.

You mentioned that health care technology are areas that are that are generating some opportunities now.

Certainly recurring revenue has been a great opportunity for us at Monroe. We had last year, we did record levels of recurring revenue transactions and those companies have been prospered as a result of Covid as we’ve seen more of a digital shift. And so a lot of that recurring revenue business has proven out to be a very successful niche for us at Monroe.

Tell us finally about the role of technology in in the deal origination operation that you have there.

For us our CRM systems are very important. One of our systems is Sutton Place Strategies, SPS, that we use has been phenomenal and that really allows our originators sitting at home to keep track of who’s active in the marketplace, what private equity sponsors could need, our assistance, what investment bankers in our industries of specialization are active. And so our originators, by using the system, are able really to have a good concentrated follow up system and continue to expand their network.

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