Members compare notes and names as they outline the process for picking minority-owned brokerage firms.
Authenticity and shared values are what many corporates prioritize when selecting diversity firms for capital markets transactions. That takeaway emerged at a meeting of the NeuGroup for Diversity and Inclusion working group last month featuring three panelists from different companies.
- “In identifying firms to work with, the most important aspect to us is the authenticity of the firm,” one panelist said. That means reviewing the diversity of the firm’s workforce, the advancement opportunities for minority employees, the actual jobs held by minorities and the path to ownership, he said.
- Another said they assess the quality of a firm by finding out “who is in the organization, by layer, by type of diversity group.”
- One treasurer said his company seeks out firms that “have the same values as us,” something you can’t assume is always the case. “What we found was there are firms out there that do not share the same values,” he said.
Go beyond recommendations. Getting advice on which firms peers recommend is a starting point and members do share lists of preferred diversity banks and brokers. But one treasurer said the only way to know if a firm’s values match the corporate’s is through interviewing and observing.
- “We had a few interviews where the owner didn’t show up,” he said. Or cases where most of the people who came to the meeting were white males, with perhaps just one member of the minority group the firm represented.
- “If they’re telling you they’re a minority firm and minorities are just 26% of the people who work there, something’s just not right. That helps you narrow the field.”
- Another area of inquiry: community relations. “We like to look at the community events they’re holding. What types of programs do they have for the folks who don’t have the opportunity, what are they doing?” he said.
- A diversity firm’s capital markets capabilities, of course, are also a factor assessed by corporates.
Representation and communication. Members often select equal numbers of Black-owned, Hispanic-owned and veteran-owned firms, as well as those owned by women. One treasurer said the types of minority firms he picks correspond to his company’s affinity or employee resource groups, some of which are based on race.
- One member asked the panelists how often they meet or communicate with the diversity firms on their rosters. One panelist meets with them once a year. Another said once a quarter if not more, saying frequent dialogue strengthens the relationship and establishes a long-term partnership with the diversity firm.
- Forging that relationship is especially important to another panelist when the diversity firm is selected to be a joint-lead manager on a deal.
- In those cases, he wants to get to know the people on the debt capital markets and syndicate teams. “We want to have a comfort level with who we’re working with because we’re asking them to play the same role as the other joint leads.”
A growing space. All of the panelists noted the rapid growth of the diversity firm space and expressed a desire to expand the number of firms that participate in their deals. Another treasurer whose company is a leader in using diversity firms for debt offerings told NeuGroup Insights:
- “We believe in investing for growth in this space through differentiated and meaningful economics and meaningful opportunity when possible—which also allows new firms to get an opportunity, albeit at lower fees. Investing for growth to us is defined by number of employees at the firm (look for growth), capital base of firm (look for growth), and performance on transactions.”