What is M&A Financing

M&A Financing describes various forms of capital that can be used independently or collaboratively, to effect a M&A transaction. Primary forms of M&A Financing include debt (loans) or equity (investor capital). Within each of these primary forms, there are a variety of different structures differentiated by term, pricing, position, and risk tolerance. The Goal of M&A financing is to fund an acquisition for a purchaser and also to provide the capital within a structure that is sensitive to the operating cash flow reality of the company. An often used form of M&A financing is mezzanine financing which is a long term loan that can be used as a replacement for equity or investor capital. These loans are highly flexible and customizable and allow an acquirer to defer the principal repayment of the loan until the back end, when the cash flow of the business has materially increased. M&A Financing can be in the form of publicly traded securities such as stocks, bonds and convertible securities. It most frequently takes the form of a bank loan, a mezzanine loan and private equity for middle market companies.