Acquisition Finance
Acquisition Finance is finance used to fund the purchase or acquisition of a business or significant business assets. It plays a crucial role in facilitating mergers, acquisitions, and management buyouts.
When is this type of finance useful? |
Facilitating Growth
Companies can quickly scale and enter new markets or segments by acquiring existing operations.
Ownership Transitions
It enables smooth transitions in ownership through Management Buyouts or succession planning in family-owned businesses.
Optimizing Capital Structure
Leveraging acquisition finance can optimize a company's capital structure by using debt strategically for growth.
Strategic Realignments
Companies can divest non-core assets or acquire strategic assets to better align with their long-term strategic goals.
Features of this type of finance include |
Repayment
Terms of funding are likely to be highly tailored based on the cashflows of either the target or the acquiring company (but probably both).
Security And Guarantees
Security is typically in short supply for these sorts of transactions, with comfort coming from company guarantees and personal guarantees from directors/shareholders.
Covenants
Due to the riskier nature of the lending, it is likely a funder will impose a number of covenants to protect their position. This could include reporting requirements (for example, providing quarterly management accounts), or performance requirements (for example, an EBITDA provision).
Restrictions
Typically lenders will place a number of restrictions on the company following this type of funding (for example, limiting divided payments)
