As the private credit industry expands, it brings acquisition finance innovation and efficiency to companies that have been overlooked in the past. Historically, middle market companies took a one-off approach to acquisition finance. Rather than focus on funding an ongoing strategy, they were more focused on raising acquisition finance for just one deal.
Acquisition finance is a highly sought form of capital that can be either a blessing or a curse for a company. How it ends up has much to do with the mindset of the person seeking acquisition financing in the first place. If you view it transactionally as a functional commodity with little appreciation for its subtle differences, you often get burned.
Balance is a virtue that underpins soundness in thought, life and debt structures. Finding balance is very beneficial in deciding how much senior debt vs. mezzanine debt to use in your financing solution. There are a number of practical and high-level strategic things to consider when making this calculation.
Despite the high professionalism of acquisition financing lenders, there are still tricks up their sleeves. Some are industry conventions that are seldom questioned while others are unique to specific acquisition financing lenders. The segmented process of raising acquisition financing naturally creates the opportunity for lenders to rig terms in their favor.
May you acquisition finance in interesting times, said my recent fortune cookie. The current economy can certainly be termed interesting, as it shifts from one theme to another. These shifting forces require different approaches to acquisition finance to ensure soundness, flexibility and opportunism.