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Niche industries are everywhere and present a conundrum for acquisition financing providers. Each lender has their own set deal criteria that governs the types of acquisition financing deals they can do.

Roll up strategies need copious levels of acquisition financing, yet capital requirements do not end there.   Rapidly scaling companies create capital needs far beyond the purchase price in the form of integration costs, transaction costs, working capital and growth investment.

First time users of acquisition financing often wade into the deep end with little focus on debt capacity. Debt capacity analysis is the foundation of all M&A and acquisition financing structures. There are several important principles of debt capacity that underpin how a smart acquisition financing provider will view your deal.

Working capital is the cog in the flywheel of daily business activity, converting orders into sales. While vital, it is underemphasized with most acquisition financing transactions. Rather than appreciating its importance to day-to-day operations, some buyers look at working capital as an asset to squeeze out extra acquisition financing to fund the purchase price.

Acquisition financing approval creates fist-pumping joy for most acquirers, who have worked hard to gain the confidence of the acquisition financing lender. Borrowers, due to the difficulty of diligence and the fog of questions, often conflate approval with 100% confidence.