Chapter 26 - The Financial Sponsors Group Special

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The Financial Sponsors Group Special

Sponsor Coverage, Co-Investment & Fund Relationships BEAT 2

Overview

FSG is the investment bank's dedicated coverage group for financial sponsors - private equity firms, infrastructure funds, credit funds, sovereign wealth funds. FSG doesn't execute deals; it originates them. The FSG banker is a relationship manager, deal sourcer, and strategic advisor to the fund, sitting between the fund and the bank's execution teams (M&A, LevFin, DCM, ECM). Think of FSG as the bank's face and trusted voice to the sponsor world. BEAT 3

FSG vs M&A

FSG originates, M&A executes. FSG is organised by sponsor (one banker covers KKR across all deals), M&A is organised by sector (TMT team, healthcare team). Collaboration: FSG brings the deal, M&A brings the sector expertise. Tension: Who gets credit? Who runs the process? Who manages the client? Top banks manage this through joint accountability models - shared fees, shared P&L, shared decision-making - to align FSG and M&A incentives. BEAT 4

Why FSG Exists

One PE fund generates revenue across multiple products: M&A advisory (buy-side, sell-side) Leveraged finance (acquisition financing) DCM (refinancing) ECM (IPO exits) Hedging/FX Prime brokerage (for credit funds) Fund finance FSG ensures the bank captures maximum wallet share from each relationship. Without dedicated coverage, sponsors would fragment across multiple banks. With FSG, one relationship manager owns the entire relationship and coordinates the bank's response. BEAT 5

The Coverage Model

Banks assign 1-2 senior FSG bankers per major sponsor. Dedicated coverage for top 20-50 sponsors globally. Smaller sponsors covered by regional FSG or generalist bankers. The FSG banker's job: know the fund's portfolio, investment criteria, dry powder, decision-makers, preferences. Be the first call when a deal opportunity arises. Your mental database is your edge. BEAT 6

Sponsor Universe

The sponsor universe is tiered by fund size and sector: Mega-cap ($15B+ fund): KKR, Blackstone, Apollo, Carlyle, EQT, CVC, BC Partners Large-cap ($5-15B): Permira, Cinven, Advent, Bain Capital, Warburg Pincus Mid-cap ($1-5B): Bridgepoint, Hg, IK Partners, PAI Infrastructure: Brookfield, Macquarie, Global Infrastructure Partners Credit: Ares, Oaktree, HPS, Golub Each has different coverage needs, deal pacing, and relationship requirements. BEAT 7