Volatility is a permanent fixture, and the margin for error in dealmaking has narrowed significantly. Navigating this environment requires a psychological shift in approaching risk and relationship management.
This year’s Rainmaker winners discuss the most common mistakes made in a turbulent market, suggesting the path to success requires a renewed commitment to transparency, underwriting rigor and courage to stay engaged.
The Danger of Inertia and Delay
A pervasive mistake in a shifting market is believing time is a renewable resource. When conditions deteriorate, many stakeholders wait for a rebound, allowing value to evaporate. Teresa C. Kohl of SSG Capital Advisors warns that dealmakers often mistakenly assume they have more time than they actually do: “In volatile markets, time can quickly erode value and narrow strategic options. Stakeholders often want to wait for conditions to improve, but delays can make situations more difficult to resolve. I have seen deals fall apart or deteriorate because people did not move fast enough. The most effective dealmakers recognize when to move decisively and push the process forward.”
This can lead to a dangerous narrowing of escape routes. Tom Goldblatt of Ravinia Capital sees this manifested as a reliance on a single “savior” buyer: “Dealmakers convince themselves one buyer will solve it, or a few more months will turn things around. By the time they call us, the options have narrowed.” He advocates for a broad, structured process from the start because “informal, one-off negotiations hand control to the buyer.”
Kevin J. Simard of Choate Hall & Stewart adds that under-reacting is just as dangerous as moving too slowly. “Some dealmakers underreact because they aren’t closely monitoring their portfolios or don’t fully understand how their borrowers’ businesses are performing. In a volatile environment, that lack of insight can leave them flatfooted when conditions deteriorate.”
The “Execution Over Discipline” Trap
When the pressure to close increases, rigor is often the first casualty. Gary Lembo of Paladin, argues that while the goal is always to preserve value, failures often trace back to a lack of on-the-ground diligence:
“When things are volatile, there is pressure to move quickly. In that environment, I see corners get cut. True diligence is not just reviewing materials in a data room. It is on-the-ground confirmation. It is understanding the operations. It is pressure-testing assumptions. It is asking the second and third question, not just accepting the first answer.”
Isabelle Lafond of Northpoint Commercial Finance echoes this, noting that volatility often tempts people to skip essential steps: “Cutting corners either by chasing quick wins or not doing usual due diligence … entices buyers to take unnecessary risks. The deals that stand the test of time are grounded in steady fundamentals and structures that protect both the customer and the bank across cycles.”
This rush can lead to “confusing activity with progress,” according to Srid Kannan of Ares Commercial Finance: “When conditions are choppy, opportunity sets naturally expand, and the temptation is to push harder to close more deals. Too often, that leads to rushing execution or compromising credit standards.”
Alex Dunev of Bow River Capital sees this as a drift away from asset-level discipline: “A common mistake is stretching advance rates in competitive environments or relying too heavily on historical performance without adequately stress-testing forward scenarios … [or] prioritize deployment over selectivity.”
Ultimately, as Greg Hurst of MUFG points out, stretching to win a mandate can undermine long-term credibility: “Not every deal is meant to be done, and losing discipline on structure or price can undermine credibility over time.”
The Emotional Reaction
Volatility frequently triggers a fight or flight response in capital providers. James Poston of eCapital observes that “panic often pushes people to chase yield or move outside their core lane,” rather than staying focused on the markets they know best.
Conversely, Gilbert Liu of Herbert Smith Freehills Kramer warns against letting panic override creativity: “When uncertainty spikes, people often narrow their thinking instead of exploring new ways to solve problems. I believe the better path is to slow down, analyze setbacks objectively and collaborate with all stakeholders to uncover workable solutions. Flexibility becomes essential, but it should never come at the expense of integrity.”
The opposite of panic is the total retreat, which Michael McElroy of Oakmont Capital Services identifies as a major missed opportunity: “The biggest mistake dealmakers make in volatile markets is pulling back. Volatility feels risky, but it’s also when the strongest opportunities emerge. By staying visible, proactive and solutions-oriented during these periods, you gain a significant advantage and often capture the gains that come from being present when the market is in motion.”
Chris Pagano of Mitsubishi HC Capital America cautions against assuming the worst outcomes and pulling out of sectors: “Taking time to review the situation and truly understand the immediate and potential impact of volatility before making lasting decisions is required to ensure rational decision making. Clients often need us the most during volatile markets.”
Eliot Kerlin, Jr. of Broadwing Capital sums up the need for a steady hand: “Allowing short-term uncertainty to drive long-term decisions leads to freezing and stopping pursuit of opportunities entirely. Staying consistent in your approach builds credibility with founders, lenders and investors.”
Complacency and the “Herd Mentality”
In a market defined by new challenges, some dealmakers forget financial cycles are inherently repetitive. Peter Beardsley of Loeb & Loeb warns against the trap of thinking “this time it will be different.” He notes that while products may have “fancy new names,” the underlying causes of distress remain the same: “I started my career doing a fair amount of restructuring work, and that skill set has come in handy to ensure that our deals are papered tightly and there are few trap doors for assets to leave … [or] documentation issues that could give a borrower unnecessary leverage.”
Michael A. Jacobson of Katten highlights the danger of a “herd mentality” motivated by the fear of being left behind: “Moving too quickly or too slowly can have a sub-optimal impact; sure, returns may temporarily benefit in the near term. However, aggressive moves and approaches in private credit may create longer-term challenges and headaches.”
Pete Morgan of Winston & Strawn adds that complacency is the enemy of value: “Volatility creates opportunity for certain clients, and connecting those clients to the opportunities is always appreciated. Bringing relationships, creative solutions and pragmatic advice are what most clients need when there is volatility. Clients often refer to us as their therapist in times of turbulence.”
Strategic Misalignment and the Cost
of Silence
Finally, success in a volatile market requires a ruthless focus on high-probability outcomes. Jay Fabian of Mountain Ridge Capital warns that focusing on deals with “almost no chance of bearing fruit” is a silent killer of productivity: “One’s time and reputation as being an honest broker are the two most critical things to manage. The opportunity cost of spending time tweaking the finer points of a proposal for which there is limited chance of winning can be a killer.”
To mitigate these risks, communication must be the priority. Nolan Reichert of Haversine Funding points out that a common mistake is failing to communicate early and often. “In volatile markets, transparency between lenders, borrowers and capital partners is critical. The deals that tend to work best are the ones where everyone has a clear understanding of the risks and expectations from the beginning,” Reichert explains.
By avoiding these common pitfalls, dealmakers can navigate volatility as an opportunity to build more resilient and durable partnerships. Leaders who succeed will be grounded in fundamentals and flexible enough to pivot with market demands. •
Rita E. Garwood is editor in chief of ABF Journal.