Top 4 Tips when Seeking M&A Financing

Mergers and acquisitions can help your company take flight and reach new markets, previously off limits. Often, capital access is a barrier to seeing M&A possibilities. Yet, there is an abundance of M&A money available in the market.

Companies that do their homework and seek out capital options will be rewarded. Here are tips for seeking M&A financing:

Cover the Market

There are dozens of different financing structures available. The market is geographically fragmented and stratified by deal size.

Many regions lack the full array of options, and also lack sophisticated advisors who can help you tap these options. The best way to start is to cover your local market and talk to all middle market deal professionals.

From these discussions, a few names of firms will emerge and you should call them up and learn what they offer. Most middle market M&A financiers are very professional and good people.

Even if your deal is not a fit for them, they will point you in the right direction.

Talk to your Lender

Often banks have existing relationships with mezzanine funds or cash flow lenders that they can refer you to. They may refer you to advisors that have networks of lenders in other parts of the country.

The key is to talk to everyone and daisy chain all leads.

Use Creative Structures

The best deals are the ones with the seller’s hold a note and finance a portion of the purchase price. Most sellers realize that 100% cash is hard to achieve and are realistic about their need to hold a note.

You can also leave a minority position of the shares with the owner and purchase less than 100% of the shares. Be creative in the forms of financing your bring to your deal, and you will create a better deal for yourself.

Have a Plan B

Lenders have rigid approval processes and can get cold feet for reasons beyond your control. Always have at least a few lender options at play in your deal. You need to ensure that you can preserve the deal and having multiple lenders will give you the power to be able to close on your terms.