Do you want to finance an Acquisition that has a Promising Future and Value Generating Potential?
Acquisitions form a big part of the corporate finance world, and a key element in the process of any acquisition is obtaining Acquisition Financing, which includes the use of debt, equity, or other hybrid financing techniques to acquire a majority interest in the target company. The institutions providing such funds are known as Acquisition Financiers.
Most of the financing done by them involves Leveraged Buyouts (LBOs), in which a significant amount of borrowed money is used to fund the acquisition. They are also involved with Management Buyouts, in which the managers of the firm take a controlling interest using borrowed funds.
In a typical acquisition financing scenario, a small percentage of equity and a larger percentage of debt is used to cover the acquisition price. In general, debt financing is advantageous as the cost of capital lowers since debt is generally available at a lower cost. A typical acquisition financing case involves various types of capital, such as traditional bank loans, mezzanine debt and private equity. Mezzanine financing is a combination of debt and equity financing.
The type and availability of funding depends on the financial structure of the target firm. The company's valuations of assets and cash flow, the extent of leverage permissible, the type of business, and the anticipated market risk are all factors that determine which source of funding is most appropriate. Moreover, while deciding about the optimum acquisition financing structure, the risks associated with the business proposal and the time horizon must also be properly considered.
- Identifying and assessing the financial standing and credit rating of the prospective borrowers
- Analysing the fair value of the collaterals, typically the target companies
- Lack of sufficient and reliable information about the knowledge and experience of the management team of the borrower
- Assessing the borrowing company's capacity to repay on time, which depends to a great extent on how well-structured the business plan is
- A large database of clients looking to make acquisitions using borrowed funds
- In-depth analysis of the target company's business as well as existing capital structure
- Extensive analysis of the cash flows and credit history of the purchasing company
- Comprehensive information about the expertise and experience of the management team that will help in analysing the riskiness of the investment
- Availability of expert services catering to each and every stage of the financing transaction
- Surety that the funds are invested with clients of good credit standing and repaying capacity. Assurance that the target companies provided as collateral, have good financial prospects
- Unbiased and independent advisory ensures complete transparency, thus reducing chances of conflicts in deal making
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