The Compelling Case for Acquisition Financing

Acquisition financing is often viewed as a wall street phenomenon that does not apply to most mid-sized companies. While big deals make the headlines, thousands of smaller middle market deals attest to the breadth and depth of the acquisition financing market.   Acquisition financing is a tool for corporate scaling and should be a component of the growth tool kit for every growth-oriented organization regardless of its stage of development.

Acquisition financing preparedness forces a company to adopt new ways of thinking and processes which are conducive to building long term value. For instance, acquisition financing forces a company to strategically define its strengths and to search for acquisition targets that leverage this strength. In examining their strengths, companies become more self-aware as to their differentiators and ways to capitalize on them.

In analyzing the business, management usually uncovers high potential areas of organic growth that can be activated simultaneously with the acquisition financing. In preparing for acquisition financing, companies are wise to elevate and organize their historical financial records. This includes accounting financial reporting as well as internal operational dashboards such as key performance indicators. The more organized the reporting systems are, the smoother the integration and the more realizable the value from the acquisition financing step. Regardless of whether the deal closes, there will be significant returns from elevation of financial reporting systems.

Finally, acquisition financing offers a faster growth path for company’s intent on scaling. Internal growth can be a long slog, rife with starts and stops due to resource limitations. An acquisition provides significant resources and years of internal growth in one large step. It allows for step change type growth and the opportunity for strategic transformation. Most companies that successfully acquire generate significant equity value which paves the way for a successful exit down the road.