Team flow makes the Acquisition Financing Go

Posted on: September 25th, 2023

acquisition-financing

Acquisition financing raises are not form filling, cookie cutter applications but complex, multi-faceted information gathering exercises. Acquisition financing lenders seek to dig into a business and understand the raison deter of the business. To run a successful process, companies need to elevate their workflows and establish team flow within the scope of the diligence process. Team flow processes are led by an orchestrator who can work with different teams to create higher level information and company insights to share with the acquisition financing lender.

It imposes a critical lens on the processes, information and narratives used by the company, to develop higher quality frameworks and content for presentation to the lenders. The foundation of team flow is traditional information gathering and review. Yet team flow involves two-way interaction between the producers of the information both across departments as well as between the orchestrator and the departments. Whereas normal diligence preparation involves producing reports and uploading to a data room for review by acquisition financing providers, team flow requires a preparatory level of cross review and refreshment before the information is disclosed.

Team flow allows the company to organize their best talent in a structured way to positively shape and guide the disclosure of information to the lender. Information and institutional knowledge are surfaced, crystallized and routed from one team to another, ultimately resulting in a strong, holistic presentation framework for the lender. Through having multiple people involved in the creation and review process, this exercise goes beyond simple diligence information production and allows all to have agency and buy in into the process.

When department heads are empowered in the diligence process and orchestrated in a team flow manner, they take ownership of the process and make it a priority resulting in higher quality outputs and on time deliverables. Acquisition financing lenders see a tremendous amount of information from prospective borrowers throughout due diligence processes. Often the information is off the shelf, canned material that does not do a good job of portraying the business. Through introducing the concept of team flow, companies can elevate their information grade and score big understanding gains with their acquisition financing lender.

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.