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Glossary

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Acquisition finance

Acquisition finance is the funding used by a business to purchase another company or its assets. This type of financing can come in various forms, including a term loan or growth credit, bank loans, private equity, mezzanine financing, or asset-based lending. Acquisition finance is commonly used in mergers and acquisitions (M&A) and enables a business to expand its operations, enter new markets and capitalise on competitive advantages.

The structure of acquisition finance depends on factors such as the size of the transaction, the creditworthiness of the borrower and the expected returns. Lenders typically assess the cash flow and profitability of the target company to determine the level of financing available. Some acquisitions are funded through leveraged buyouts (LBOs), where debt is used to finance a significant portion of the purchase.

Benefits of acquisition finance:

  • Enables business growth and expansion without depleting cash reserves
  • Offers flexible financing options tailored to the acquisition strategy
  • Can improve economies of scale and operational efficiencies
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