Financing an acquisition is the process in which a company that plans to buy another company tries to get funding via debt, equity, preferred equity or one of the many alternative methods available. It is a complex task and requires sound planning. What makes it complex is the fact that unlike other purchases, the financing structure of M&A can have plenty of permutations and combinations.

How to Finance a Business Acquisition?

There are many ways in which you can finance business acquisition. Popular methodologies are listed below.

  • #1 – Cash transaction
  • #2 – Stock Swaps
  • #3 – Debt financing
  • #4 – Mezzanine Debt/ Quasi Debt
  • #5 – Equity investment
  • #6 – Vendor Take-Back Loan (VTB) or seller’s financing
  • #7 – Leveraged Buyout: A unique mix of debt and equity

 

Please note in large acquisitions, financing business acquisition can be a combination of two or more methods.

https://www.wallstreetmojo.com/financing-acquisitions-cash-debt-equity-lbo-swaps/