eThesis - Kauppakorkeakoulun sähköiset gradut

AALTO UNIVERSITY SCHOOL OF ECONOMICS ABSTRACT Master's Thesis in Finance May 29th, 2013

RELATIONSHIP BANKING WITH PRIVATE EQUITY CUSTOMERS How Do Loan Officers and Private Equity Borrowers interact?

PURPOSE OF THE STUDY The aim of this study is to investigate, how relationship-lending technique is used with private equity customers. Which characteristics define relationship customers in relationships between loan officer teams and teams of financial professionals from private equity firms and what kind of values a strong banking relationship generates from customer's point of view? In the existing literature concentrated lending, cross-selling intensity and sharing own business ties with banks are seen as a valuable way to strengthen a relationship with financial arrangers. Increased availability, decreased pricing and increased quantity of credit have been statistically found as benefit of a strong banking relationship. Purpose of my study is to investigate, does these findings of the existing literature also exist in the relationships between private equity firms and banks.

DATA The empirical analysis of the study is based on two separate datasets. The first dataset includes interview data from eight financial professionals from private equity firms and the second dataset includes all the quantitative data related to interactions between loan officers and financial professionals from private equity firms. The second dataset was collected from websites and asked from private equity companies.

RESULTS Firstly, the main findings of this study are that concentrated lending and bringing new customers to banks are valuable way for private equity firms to strengthen a banking relationship. From private equity customer's point of view buying other financial services from banks was not seen as a valuable way to strengthen a banking relationship. Secondly, building a strong relationship with banks can be beneficial in form of increased availability of credit and increased quantity of credit. From private equity customer's point of view decreased pricing of credit was not seen as a benefit of a strong banking relationship.