According to market research firm Preqin, Goldman Sachs Group Inc (GS.N) formed the biggest fund of its kind after raising $8 billion in 2015. The fund, GS Mezzanine Partners VI Fund, provides financing for leveraged buyouts. It is unknown how much of this fund was funded through Goldman Sachs or outside investors, such as pension funds and insurers. Goldman has used the fund to finance some of the largest buyouts in the past few months. GS Mezzanine Partners VI Fund used $750 million to finance part of CVC Capital Partners Ltd’s $4.6 billion acquisition of Petco Animal Supplies Inc. It also used $580 million to fund a portion of Silver Lake Partners LP and Thoma Bravo LLC’s purchase of SolarWinds Inc for $4.5 billion.

As the Fed decides to ease interest rates, middle market acquisition financing structures will benefit in a number of ways. The underlying values of middle market companies will increase leading to a higher enterprise value and lower loan to value ratios for existing portfolio companies of acquisition financing lenders.

The role of acquisition financing is infrequently elevated above a functional transactional one. When a business needs financing to acquire, they go to the market and source acquisition financing to supplement their equity investment to close the deal. Despite existing in many different forms, acquisition financing is rarely explained in terms of the value it brings to the acquirer.

Acquisition financing underwriting usually focuses on business and financial issues that underpin the stability of cash flow. Providers of acquisition financing usually validate the durability of a company’s competitive advantage and the depth of its resource base. Environmental issues are usually not a major part of the analysis in today’s service and technology-based economy.

Goldman’s GS Mezzanine Partners VI Fund raises $8 Billion

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