In life as in acquisition financing, balance is the gift that keeps on giving. Much as portfolio diversification is the only free lunch in stock investing, so too does the right mix of debt and equity bring risk diversification to your transaction. Too often buyers tilt their allocation to debt and leave too little equity in the acquisition financing equation.
Modern businesses crave innovative acquisition financing that can help fund ambitious growth plans. The demand for this type of acquisition financing is always present but not always fulfilled due to the state of the acquisition financing market. While there are thousands of capital providers, many of them like banks use traditional screening and underwriting approaches that fail unlock value for the borrower.
Acquisition Financing increased in deal volume in the back half of 2024 and is poised to continue its market momentum in 2025. The US economy’s strong growth in 2023 and 2024 was a resounding counterpoint to the naysaying experts who predicted a recession due to inflation and interest rate hikes.
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.