The market for acquisition financing is oriented towards private, middle market companies consisting of businesses that are founder or private equity owned. Many of the acquisition financing lenders are private themselves including mezzanine funds, finance companies, and private credit funds.
The times are changing in a positive way for companies in need of acquisition financing. Historically, companies would look to raise the capital they needed for a specific deal as part of a one-time funding event. There was less focus on the continuous funding of a roll-up acquisition financing strategy, and most companies approached banks as their first stop on the capital raising trail.
Acquisition Financing is a mysterious form of capital that is not easily researched or benchmarked. Despite the number of sites and platforms that aim to illuminate it, it defies easy characterization. It is certainly a loan with a term, maturity date and interest rate. But the construction of the loan is subject to various analytical frameworks and rules relating to risk, return and industry practice.
Acquisition Finance is essential for companies building value through acquisitions. It is the energy that powers the acquisition program. It usually consists of a single loan or combination of loans. However, seeing it only as a loan belies its more important role as an encapsulation of deal strategy.
Acquisition Finance can be played conservatively or aggressively depending on the overall goal and tolerance for risk. Certain acquisition finance structures are game changers and really move the needle. Like a power move in athletic competition, be it a sack on the gridiron or a takedown on the mat, these structures uniquely position the borrower as a player in the industry capable of rapid-fire acquisition or major innovation.