Structuring and Financing Acquisitions

Deal structure is very important. The structure of an acquisition can take many forms and it does impact the final price. Some things that need to be considered are whether it is an asset or share purchase and what assets are included or excluded from the purchase. There are implications for all of these decisions and they need to assessed on how they impact your deal.

Work with a team of advisors to determine the best deal structure - your accountant, lawyer, and business broker. From here an offer can be sketched out to see if the buyer and seller can agree on the Price, Terms, and Structure of the deal.

Financing the Acquisition

There are three available sources:

  • Equity This is the buyer's own funds and typically 20-60% of the sale price is required for a down payment. Home equity can be used to finance an acquisition, usually up to 80% of the home's value.
  • Seller Financing This is where the seller finances a portion of the purchase price. It demonstrates a seller's confidence in the business and improves the buyer's ability to qualify for acquisition loans. There are flexible repayment options that can be designed to reduce the buyer's risk in the deal.
  • Bank Financing There are two options for prospective purchasers when it comes to bank financing. A term loan or lease against the assets or subordinated debt which involves a flexible repayment schedule based on the business' cash flow. The optimum financing option really depends on each specific deal.

Successful business acquisitions depend on securing acceptable financing prior to purchasing the business. Please contact us for a meeting to discuss your particular needs; we would be delighted to help.