Posted on: August 14th, 2024

noble-acquisition-financing-lenders

The acquisition financing middle market tends to be viewed by borrowers as a vast sea of capital marked by minor differences in pricing and funding amount. Depending on the deal to be done, one needs either more or less acquisition financing to fill in the gap beyond the bank loan. In this context, capital is viewed functionally and indiscriminately as the sum of the terms and conditions within the loan agreement. While this is absolutely the case transactionally, the deal usually represents a much bigger event to the buyer than just a closing. For founder-owned businesses that do not frequently acquire, an acquisition financing is a huge strategic step in the historic evolution of the business. Founder-owned and family-owned businesses tend to be successful due to their relationship and partnering focus with others including employees, vendors and customers. These businesses usually have a strong culture based on knowing the people they work with and go beyond mere legalistic approaches when dealing with them.

Acquisition Financing Decision

When deciding on which acquisition financing lender to choose, these companies value noble lenders, those possessing character, reputation and predictability who mirror their own culture and engagement style. Noble acquisition financing lenders operate within an old-fashioned framework that prioritizes getting to the know the people at the company and understanding what makes them tick. They take the time to go beyond a cursory understanding of the business and learn its history, operating fundamentals and specific areas of strength. Their approach is less number oriented and more holistic based on the ingestion of qualitative, quantitative and soft information. If the relationship with the borrower is intact, most will not make shortsighted decisions that benefit them to the detriment of the borrower. Noble acquisition financing lenders are sanguine when things do not go exactly as planned and supportive when their borrowers need additional financial assistance.

Mezzanine debt lenders are usually passive with their borrowers once the deal closes. They typically fund transformative acquisitions or growth strategies for middle market companies and take a long view on principal repayment. Mezzanine debt lenders have increasingly migrated to funding companies on a direct basis where they are the primary provider of capital.

In middle market finance, mezzanine debt lenders have their own unique communication style. Due to their position in the market and their hybrid debt-equity sensibility, their perspective straddles both the debt and equity world. While mezzanine debt lenders issue loans, they think more expansively about value like the way equity investors do. Their capital is used to accelerate growth resulting in increased levels of cashflow sufficient to repay the initial loan amount.

As a foolish consistency is the hobgoblin of little minds, so too are many of the acquisition financing myths that people hold. These acquisition financing myths are borne of cliches that arise in the wall street vocabulary and enter the archetypal story telling of acquirors. For some reason, very smart and serious business people adopt these myths without much assessment of the underlying logic.

Noble Acquisition Financing Lenders

Acquisition Financing Decision