Buy-side financing expands strategic options in M&A transactions
Every company faces the challenge of optimally deploying its available equity. Particularly in the case of a capital-intensive decision such as the acquisition of another company, the question arises as to how much equity can or should be used and where the optimum proportion of debt capital (leverage) and thus the optimum risk-reward ratio of a transaction lies. In this context, it is particularly important to note that the acquisition structure and the financing structure go hand in hand and should be coordinated from the outset. For example, in the case of a majority shareholding and the associated consolidation, financing opportunities arise based on the creditworthiness of the company to be acquired.
Our approach to financing buy-side activities
From our point of view, it is particularly important that the aspect of financing is included in the M&A activities from the very beginning to be able to optimally define the search criteria. Accordingly, we accompany the buy-side financing throughout the entire process:
- Working out the optimal financing structure (equity, debt, mezzanine, vendor loan, etc.)
- Comparison of whether the planned acquisition structure and the financing structure go hand in hand
- Preparation of documents for approaching banks/debt funds
- Accompanying the negotiations with banks/debt funds
- Ideally, agreement of a so-called hunting line with banks/debt funds to be able to implement the acquisition strategy in a flexible and responsive manner
Our overriding goal in all these activities is to increase the likelihood of transactions being implemented for our clients and, optimally, to generate advantages in negotiations with sellers through an advantage in the speed of implementation.
Sell-side financing optimizes the sales process and expands the buyer spectrum
Basically, we're just switching to the other side of the negotiating table compared to buy-side financing. Wouldn't it be ideal for a company buyer not to have to worry about financing the purchase price because the seller brings a financing proposal from his bank to the negotiating table? This financing approach of so-called stapled finance is quite widespread in the M&A financing market - in contrast, in our experience, it is less familiar to sellers of companies.
Our approach to sell-side financing
To be able to involve potential financing partners in good time, the topic of sell-side financing should be addressed as early as possible in the divestment process. The M&A specialists of WTS Advisory have an extensive and resilient network of banks and debt funds at their disposal to find a suitable partner for the topic of stapled finance.
Specifically, we can support our clients in the area of sell-side financing as follows:
- Ongoing update of financing conditions with our network partners in the area of banks and debt funds are the basis for our services in the area of sell-side financing
- Client- and project-related preparation of documents & support in discussions with banks and debt funds
- Negotiation of client- and project-related, individual conditions with the goal of a term sheet with the key points of financing
- Attachment of the term sheet or the financing proposal to the investment memorandum ("Stapled Finance")
The declared goal of our activities in the area of sell-side financing is to maximize the sales price for our clients and to increase the probability and speed of implementation.
If you are interested and have any questions, please do not hesitate to contact us.
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