Financing an acquisition

Ben Smith Interpath

Buying a business can be a complex and not to mention stressful process and the financing of a transaction is often the most intricate part.

A buyer may be in the fortunate position where they hold enough cash to fund the deal outright - this removes a significant layer of complexity.

Often, however, many acquirers need to meet the purchase price through various kinds of financial alchemy which normally includes utilising a mix of own cash and raising debt finance.

The latter part is where issues can often arise.

The lending landscape has never been more complex with an explosion of alternative sources of finance since the last financial crisis – generally, this is a good thing.

However, navigating that world is fraught with difficulty - especially given the current “uncertain” economic environment.

When it comes to funding acquisitions areas that often trip up would-be deal doers are varied: certain lenders simply don’t operate in the acquisition space, others are cold to certain sectors and others may have computers which frequently like to say “no”.

Twenty years ago the source of finance to fund your next acquisition was probably to be found on the nearest high street and - for certain deals – this could still be the case.

However, often it takes a more thorough search of an increasingly vast market to search out the perfect finance partner to enable your deal.

Few businesses would attempt to undertake the legal work for an acquisition themselves yet far too many good acquisitions fall over because businesses don’t seek sound external insight when it comes to financing the deal.

In terms of raising acquisition finance my advice is simple… seek advice.

Enjoyed this? Read more from Ben Smith, Interpath Advisory

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