The Importance of Timing in Acquisition Financing

Acquisition financing deal timelines are often drawn up with great certitude but rarely understood at a deep level. It often seems as if the parties in their eagerness to engage and collaborate, overlook the atomic components that truly regulate the timing flow.  In all deals, timing can make or break the deal.

Oftentimes, excessive time is the grim reaper for deals as it causes deal fatigue and external event exposure. When due diligence grinds on and questions seem endless, initial deal enthusiasm wanes. The acquisition financing lender begins to rethink their interest level. The longer it takes, the more the deal is susceptible to macro-environmental events, where the world changes overnight and acquisition financing lenders stop lending. We closed a deal on August 8^th, 2008, about one month before Lehman went under. A week or so later, the acquisition financing market began to shut down and remained tepid for the next 3 years. Had the deal not closed in early August, there is a good change the deal would have had to wait for at least three years.

On the other hand, deal timelines hath no friend like the front end of a new cycle or a new fund. When a fund has just completed their fundraising and started to make acquisition financing loans, they usually want to build up assets quickly and are able to move fast. Similarly, when the credit markets turn bullish after an extended bearish period, the entire acquisition financing market is buoyant and moves more quickly. All buyers and companies should thoroughly evaluate their internal readiness and reporting agility before embarking on a deal process. Though your internal financial reporting may be adequate for your purposes, it may not present enough detail around products, customers and gross margins for an acquisition financing lender. It is better to address these limitations before the process starts, than to start a process and have it delayed for lack of information availability. In the deal world, acquisition financing lenders often hear Time’s winged chariot hurrying near.