Mezzanine financing is a great tool to utilize when looking to finance a buyout of a firm. How mezzanine finance can help buyout firms is through providing capital for the riskier part of the capital structure. Mezzanine finance is less expensive than an equity sponsor’s capital and is more flexible than a bank loan.
Mezzanine finance allows buyout firms to put in less equity and leverage their investment for higher returns. If buyout firms did not have access to mezzanine finance,they would need to put in more of their own capital in order to close the deal.
Another way that mezzanine finance can help buy-out firms is through providing a second opinion on due diligence
Mezzanine lenders will often review the financials of the target company and make sure that the company’s financial information is accurate and there are no red flags in the deal. This is another example of how mezzanine finance can help buyout firms. Finally, mezzanine finance firms often make faster decisions and can get to a closing more rapidly than a bank.
The ability to meet a transactional deadlines and to run an accelerated process is a major part of how mezzanine finance can help buyout firms. While buyout firms always prefer to have the lowest price debt capital in their deals,it is often reliability and certainty of close that show how mezzanine finance can help buyout firms.