Sound Acquisition Financing Ideas – Commercial Business Loans For Purchase & Merger

Updated: June 27, 2011

Is the term ‘opportunistic a negative one? We certainly don't think so when it comes to legitimate business dealings, so in many cases you simply have come across a firm or competitor that in your opinion is undervalued. Bottom line, it's a bargain and you're focused on exploiting either undervalued assets or companies that are not performing well in certain market conditions.

Don't forget also that acquisition financing is all about some even more common sense scenarios as identified above. Its often a classic opportunity to lower your operating costs as overheads in the dual firm can be cut and other efficiencies can be extracted from the combined mix .

What are the types of acquisitions? We can summarize those into three areas, and in some cases the type of acquisition you make will impact directly the type of financing and commercial business loans that you achieve.

Back to our three merger scenarios - they are as follows: friendly, hostile, and leveraged or management buyout. Many smaller companies are of course happy and content to be taken over; they fully realize the potential synergies. However in certain cases it gets somewhat ' ugly ' in that the management or owners of the firm you intend to buy or acquire simply are opposed to the idea.

Leveraged and management buyouts tend to be asset driven. The downside of a leveraged or management buyout is that if done improperly a large amount of debt can leverage your new firm negatively. There are numerous creative ways to finance acquisition financing in Canada.

Financing methods include asset based lending, subordinate or mezzanine debt (i.e. unsecured loans based on historical and future cash flows) as well as a private equity component.

Valuation is an important aspect in the area of acquisition financing. Your valuation will have a direct impact on the business loans you enter into to complete the purchase. In evaluating a final valuation or purchase price you will want to look at things like general financial operating activities - i.e. the financials. But don't forget also that other factors such as new assets that might be required, working capital needs, etc also will drive that final valuation number.

Featured Research
  • How to Select Contact Center Software in 9 Steps

    Your choice of contact center software will affect the future success of your business. Don’t leave this important decision to chance. This guide provides nine actionable steps for the selection process. more

  • [Infographic] 15 Questions to Ask When Selecting a VoIP Provider

    Deciding which phone system is right for your business can be difficult. With our VoIP technology blueprint, discover the top 15 questions you should ask VoIP vendors before you make a buying decision. more

  • 2017 Business VoIP Buyer's Guide

    In 2017, more business will transition to a VoIP phone system. If you are among them—or if you’ll be upgrading an existing VoIP system—you need to learn about the latest technologies and market trends. more

  • The Basics of Real Time Personalization

    Real-time personalization of the customer experience has been described as the holy grail of digital marketing. And the race is on. Gartner believes that by 2018, businesses that excel in personalization will outsell those that don’t by 20%. Though the benefits are clear, the path to get there is not. more

  • Hidden Costs of Contact Center Software

    Creating a great customer experience for each person who reaches out to your customer support center is vital to developing a loyal and ravenous customer base for your business. In fact, according to Walker Information, Inc., “By 2020, customer experience will overtake price and as the key brand differentiator.” more