Mezzanine Financing Express – the Ultimate Roll-up Play

Mezzanine financing creates huge scaling value with roll ups, yet it is often overlooked in the capital search. It is the ultimate roll-up play leading to large growth in EBITDA in a short period of time. Mezzanine financing gives an aggressive buyer a large amount of capital over a several year timeframe, ensuring they have money to close. Platforms we have advised on have grown EBITDA 3 to 4-fold within a two-year period.

Mezzanine Financing Creates Acquisition Momentum

When a buyer rides the rails of the mezzanine financing express, they develop an acquisition cadence and strategic scaling rhythm, that accelerates the growth of the platform. With a large, delayed draw loan behind them, the buyer becomes a preferred purchaser in the market due to their ability to close. Rather than talking about raising capital to close, the mezzanine financing express pre-loads the buyer with financing.

Buyers who opt for single acquisition lenders move more slowly and miss out on growth opportunity. Ultimately, they do not have a unified capital foundation in the company but a rickety, one-off loan structure that is hard to expand.

Mezzanine Financing Supports Large-Scale Roll-Up Growth

The mezzanine financing express is more expensive than a standard loan and involves more performance requirements and covenants but the ability to scale is unsurpassed, far outweighing the extra cost. It is especially valuable for companies in an intense transitional acquisition mode, where a large portion EBITDA is being acquired. Roll-ups are usually a race against time, usually with a window open for acquiring and a land grab opportunity.

With mezzanine financing behind them, a buyer has usually developed their internal M&A processes and operational integration workflows. This makes them different and more sophisticated than other companies who acquire infrequently lack the internal resources and people to make the deal a success. The mezzanine financing backed platform also usually has more investment wisdom due to the combination of board, senior management and lender perspectives that coalesce into a unified acquisition decision.