Acquisition Finance
What is it?
- It refers to the financing obtained for the purpose of funding an acquisition. It is often highly structured to suit the specific needs of the acquirer and is usually a combination of different funding sources.
- Acquisition finance uses excess cash in a company’s balance sheet to fund an acquisition.
- It is also the issuance of new debt or use of an existing credit line to fund an acquisition.
What to expect?
- This typically occurs when the acquirer has a large cash reserve and is significantly larger than the acquiree.
- The availability of debt financing will be constrained by the acquirer’s financial position and the cash flow situation of the acquiree.
- In an acquisition finance, no cash exchange happens between the two companies and the acquiree also gains an ownership stake in the acquirer.
- Both positive and negative covenants are seen in acquisition finance agreements.
- Raising capital through an acquisition financing is significantly cheaper compared to that of an equity fund raise.
Who should consider
- Companies who have history of positive income and cash flows as well as leverage ratios that are below industry averages.
- Companies that are looking to acquire companies that lack significant capital in their balance sheet to support their acquisition.
How Can Bayfront Help
Strategy Review
Detailed analysis of the Client and advise on value-adding corporate strategies.
Structuring
Detailed analysis of the Client’s capital structure and advise on the optimal proportion of equity and debt.
Deal Execution Management
Assisting in execution of deal processes, most commonly in the form of capital raising.
Information Memorandum
For presenting to different target audience such as lenders, new sales relationships, new client relationships.
Governance Review
To determine the specific governance needs of a company and assist in areas which would minimize risks and help achieve business goals.