Why Your Acquisition Financing Strategy Needs an Upgrade

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. Most banks consider offering acquisition financing if the company is held in high regard and the deal is big enough.

However, given the consolidation, regulation and conservatism of most banks, acquisition financing is not an area of high volume for them. Private credit funds have stepped into this market void and are accumulating market share from banks at a very rapid rate. These funds are superior to banks on several fronts. They are more commercially oriented and discerning than banks. They run more efficient and faster credit underwriting processes.  They can lend larger amounts on a per deal basis than banks due to their creative thinking and ability to fund into the future.

Most of all, these private credit funds offer bespoke structures that provide more value to a continuous acquirer because of their funding flexibility. They allow a company to fund multiple acquisitions over a multi-year period through a delayed draw term loan offered on a committed basis. This approach, which began in the early 90’s in the leveraged lending market, gives a company all the capital they need in one facility to fund a continuous acquisition strategy without having to swap out lenders mid-stream.

It is one place from one lender, a veritable one-stop shop of funding access. This simplifies capital mobilization and makes it easier to close transactions.  It reduces the friction and pain points of refinancing, cutting the time and expense of the acquisition financing journey. With all your acquisition financing pre-loaded, a buyer is in a better position. Buyers can be more aggressive in competing for deals, move more quickly and close more deals.