4 Pressure-Tested Strategies for Better Capital Markets Outcomes

Financing decisions are usually made first, and risk management second; hedging bolted onto a structure that's already been agreed. That sequencing is one of the most common reasons deals end up with worse economics than they needed to. The four strategies below aren't a checklist; they're the questions we push clients to ask before terms are set, not after. 

1. Treat financing and risk management as one decision, not two 

Run separately, financing and hedging optimize for different things and can pull against each other. Run together, they change which structure makes sense. 

On a recent M&A transaction, a company was planning to hedge a large acquisition.  On further evaluation of the financing plan, the buyer recognized that the target had significant existing fixed rate debt that could be retained rather than refinanced. As a result, the purchase price sensitivity to interest rates was much lower than anticipated, so the buyer was able to reduce the interest hedging requirements accordingly. With regards to foreign exchange, the buyer decided to fund a portion of the purchase in the target’s local currencies thereby reducing borrowing costs and reducing FX hedging requirements. Then, following an accretion analysis that illustrated a modest impact of interest rate exposure on EPS, the buyer implemented a more moderated and methodical hedging program. If the economic risks had been viewed in isolation, without integrating the financing decisions, the company would have likely over-hedged and instead increased their risk. 

2. Create competitive tension through broader sourcing 

More credible sources bidding for a deal generally means better pricing, terms, and responsiveness — but broadening the pool only works if it's done without tipping off the market or the borrower's own counterparties. 

One way to do that: approach lenders with an anonymized description of the credit and structure, so the borrower can canvass a wide field before revealing its identity. On a recent >$2 billion financing for a large telecom client, this meant approaching roughly 30 banks blind, then narrowing to six once terms were on the table — each with $400–500 million of capacity. The borrower never had to negotiate against a shrinking set of options. 

3. Use data to price what "market" means 

Comparable transactions, credit spreads, fees, OID, covenant terms, flex, issuance windows, current lender and investor demand — none of this data means much without context on what's driving rates and credit conditions at that moment. The value isn't in having the data; it's in knowing when a proposed term is off-market and negotiable versus genuinely reflective of where the market sits. That distinction is what separates a negotiation with leverage from one without it. 

4. Preserve optionality as deal terms move 

The default is to pick a market — bank debt, private credit, bonds — and negotiate within it. For large or complex financings, running parallel paths across structures (a first lien/second-lien split versus a unitranche facility, for example) surfaces real differences in leverage, pricing, size, and execution risk that a single-track process won't show. 

This is resource-intensive, so it's worth reserving for financings where the stakes justify it. But when deal parameters shift mid-process — as they often do — having a second executable structure already in motion is what gives a borrower room to move instead of a single path to defend. 

Taken together, these aren't independent tactics. They're different points at which a financing process can either lock in assumptions early or keep testing them until terms are set. 

The Cut-Through 

• The cost of getting this wrong doesn't show up as a bad rate — it shows up as a good rate you didn't know you were leaving behind. Most of these gaps are invisible unless you deliberately go looking for them, which is exactly why they persist even at sophisticated borrowers.  

• The real constraint is rarely capital availability — it's how early the right questions get asked. By the time a term sheet is on the table, most of the leverage that these strategies create has already been spent or lost. 

• None of this is a one-time setup. Rate paths shift, credit conditions move, deal terms change mid-process — a structure that was optimal at signing can stop being optimal three months later. The strategies that matter are the ones still being asked of the deal on day 90, not just day one.