The earlier we’re involved, the better the structure.
Acquisition finance is different from standard business lending. The deadlines are harder, the structure is more complex, and the cost of getting it wrong shows up not just in pricing but in the deal itself, sometimes including whether the deal closes at all.
Most acquisition financing conversations start too late: after the LOI is signed, with weeks rather than months to land the debt. By that point, optionality has been lost. The acquirer is committed to a price they may not be able to fund, and the lender knows it.
The work we do is to fix that. We design the funding stack before the bid goes firm, test quantum, leverage and indicative pricing with multiple lenders, and make sure the structure stands up to credit committee scrutiny well before the deal needs to close.
Different deal, different structure
Each acquisition deal type has its own funding logic. The leverage available, the security expected, and the questions credit teams will ask all shift.
Bolt-on Acquisition
Acquiring a smaller business to plug into the existing operations. Lender focus is on integration risk and earnings accretion. The cleanest acquisition debt to land if the existing business is well-banked.
Strategic Acquisition
Larger transaction, often transformative. Multi-bank arrangements or specialist lenders may be required. Equity contribution and earn-outs typically feature heavily in the structure.
Management Buyout (MBO)
Existing management acquiring the business from owners. Lender comfort depends on management track record, structural protections and the quality of the underlying earnings.
Partner Buy-in / Buy-out
Common in professional services firms and family businesses. The lending is often in individual names with corporate guarantees, with structure shaped by the partnership agreement.
What to settle before settlement
The mechanics of acquisition deals throw up specific issues that need clean answers in the funding pack. Get these clear early.
Share purchase or asset purchase
The structure of the transaction has material implications for tax, liabilities assumed, and the security package the lender can take. Determine the mechanism early, with input from your tax adviser and lawyer, before the funding structure is locked.
Whitewash requirements
Where the target’s assets are being used to support borrowings for its own acquisition, financial assistance whitewash provisions may apply. Solvency declarations, member approvals and notification timelines all need to be planned before drawdown.
Purchase price retention
Lenders will typically expect a retention of around 20% of the purchase price held back, payable to the vendor only after a defined period and subject to warranty claims. This protects against undisclosed liabilities surfacing post-completion.
Earnings accretion
Banks will rest on the existing trading business as the primary servicing source, but the right credit pack quantifies the earnings accretion expected from the target. Realistic, evidenced, defensible — not aspirational.
Personal guarantees
Some acquisition debt requires personal guarantees from key shareholders. Where, how much, capped or uncapped — all negotiable. The default position from the lender is rarely the best position for the borrower.
Existing facility implications
Most acquisition debt sits alongside, or refinances, existing facilities. The interaction with current security packages, covenants and pricing arrangements needs to be solved as part of the overall deal, not left to the end.
Start the funding conversation early.
The most expensive mistake in acquisition finance is leaving the debt conversation until after the LOI is in hand. By then the seller has the upper hand on timing, optionality with multiple lenders is gone, and the borrower is forced to accept whatever package the first lender will commit to.
The right time to engage is before LOI: while quantum, leverage and indicative pricing can still be tested with multiple lenders and the funding stack can shape the bid rather than chase it.
If you’re already past LOI, we can still help — but the earlier we’re in, the cleaner the outcome.
Got a target in mind?
Initial conversations are confidential and obligation-free. Even if the deal’s still hypothetical, the sooner we map the funding stack the better positioned you’ll be when it’s time to bid.