Acquisition financing is treated as a means to an end by independent sponsors. Most acquirers consider the acquisition financing process a run of the mill work stream. They need capital to close and believe the act of finding capital sources is the gateway to success.
Management buyouts are time-tested and seamless ways to transition business ownership. Based on a foundation of trust, most sellers and senior managers are able to easily navigate complex valuation and negotiation issues that often thwart third-party buyers. When closing a management buyout, owners and managers operate within their relationship comfort zone, leading to high levels of process transparency and transactional alignment.
Mezzanine debt lenders provide funding for scale-up scenarios where growth rate acceleration can be realized. These scale ups include acquisition driven strategies as well as new product or new market development. Scaling companies are not interested in single digit revenue growth but step change growth which transforms not only the size but also the diversification of the enterprise.
Middle market debt multiples are important structuring yardsticks when planning your leveraged buyout. Leveraged buyouts are a form of a corporate finance transaction wherein loans are used to fund the acquisition of ownership of a company. The purchase price is paid through leveraging the deal by structuring a loan against the cash flow value of the enterprise.
Closing more than one deal at a time creates a degree of difficulty for the acquisition financing lender. Often the deal sponsor acts as if the scrutiny and questions from the acquisition financing lender are overkill. Many a sponsor has taken umbrage at having to explain operational integration risk, feeling they have an intuitive mastery over it.