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Mezzanine Funding
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No two deals are alike in the middle market. This reality creates the need for bespoke mezzanine financing structuring to accommodate the unique aspects of the deal. Some deals have 100% rollover equity from a founder which requires non-dilutive capital. Other deals have heavy seller notes and additional growth investment which requires extra capital and longer repayment terms. Some roll-up transactions have a continuous need for capital to support future add-ons.
Mezzanine Financing Enables Creative Deal Structuring
Value in deal making occurs when the right acquisition intersects with the right deal structure. Mezzanine financing brings tremendous flexibility, creativity and durability to deal structures. With artful structuring, buyers can use it as an abundant source of cheap equity, by exploiting its desire for direct lending and return upside.
Most mezzanine financing providers have historically played in private equity deals and lacked the ability to lend directly to companies. The growth in private credit has changed this and now gives mezzanine financing providers direct access to companies. The win in mezzanine financing structuring allows you to reach further down the capital structure, to the equity level, while still maintaining the cost of a loan.
Mezzanine Financing Supports Long-Term Acquisition Growth
Mezzanine financing providers want direct deals and are willing to do more to get this type of asset in their portfolio. They will stretch further and provide a larger loan at closing. They will also provide a large, delayed draw term loan to support acquisition growth and strategic investment.
Presenting your future capital needs through a mezzanine financing lens, bounded by its leverage ratios and debt service coverage ratios, is a great idea for all companies. This causes the lender to see you as a dynamic acquisition strategy requiring intensive capital over the long term as opposed to a single, one-deal.
The dynamic growth plan opens the door to creative structuring and forces the mezzanine financing provider to do more to win your business.
