For a small or medium sized business owner, financing a business buyout, which in financial jargon means acquisition financing, has many possible solutions. While the solutions listed below are the most common, they are often customized and modified to fit the specific financial requirement of the buyer.
Senior cashflow debt
Senior cashflow debt, or bank debt is structured around future cashflows. This is an excellent acquisition finance option for a company with a strong future cash generation. Senior cash flow debt is another word for a term.
Integrated debt
Integrated debt involves blended revolving and amortising debt facilities structured against balance sheet assets and cashflow. An integrated debt structure can prove to be an excellent acquisition finance option since it providessufficient working capital headroom and a less demanding capital repayment profile when compared to traditional senior debt.
Seller financing
Seller financing involves asking the seller to partially finance the acquisition. In most cases, the buyer makes a down payment and the seller carries a promissory note for the rest of the purchase price.
Asset based financing
Asset based loans can be considered a potential acquisition finance option for asset rich companies. Asset-based financing isusually structured as revolving loans secured by the available collateral, such as inventory, accounts receivable, equipment, and fixed assets.
Mezzanine finance
Mezzanine finance is a hybrid debt instrument that lies between senior debt and equity in the company’s capital structure and shares certain characteristics of both. Its advantages include a higher amount of funding and no personal guarantee for the owner, making it an ideal acquisition finance option.
Unitranche debt
This kind of debt is structured around the specifics of a deal, by offering features of both senior debt and mezzanine finance. Unitranche debt is generally used whensenior debt fails to provide the amount of leverage required for the transaction.