Navigating the Complexities of M&A Financing

Sellers in merger and acquisition (M&A) transactions often face complex financing challenges. They have to secure funding to finance the deal, ensure that the financing is favorably structured, and manage the associated risks.

There are several different financing options available to sellers in M&A transactions, including debt financing, equity financing, and hybrid financing structures. The best financing option for a particular company will depend on several factors, including the company’s financial condition, the size and structure of the deal, and the company’s risk tolerance.

Debt financing

In debt financing, the company borrows money from a lender and agrees to repay the loan plus interest over a period of time. Debt financing can be a good option for companies that have a strong credit rating and that are comfortable with taking on debt. However, it can also increase the company’s overall debt burden and make it more difficult to obtain additional financing in the future.

Equity financing

In equity financing, the company sells shares of its stock to investors in exchange for cash. Equity financing can be a good option for companies that do not want to take on additional debt or that want to raise capital to fund future growth. However, equity financing can also dilute the ownership interests of existing shareholders and give investors a say in the company’s operations.

Hybrid financing structures

Hybrid financing structures are a combination of debt financing and equity financing. Sellers can use this option to achieve a variety of objectives, such as raising the desired amount of capital while minimizing the amount of debt or dilution of ownership.

Securing financing for an M&A transaction can be a complex and time-consuming process, but it is often necessary to ensure a successful transaction. We recommend sellers start planning their financing strategy early in the M&A process. Working with Symmetrical’s team of experienced advisors can help you understand your options and secure the best financing structure for your situation.

Give us a call today to discuss your company and goals and see what our team can offer you.