Introduction to acquisition finance

What is acquisition finance

The term acquisition finance describes the debt element of the funding for the acquisition of a business. The term is particularly associated with leveraged buy-outs, ie private equity sponsored buy-outs of businesses funded partially with debt finance.

In a typical leveraged buy-out:

1. •

   the purchaser, normally a private equity sponsor, acquires a controlling stake in a business

2. •

   the acquisition is financed with a mixture of debt and equity (including quasi equity in the form of deeply subordinated debt) contributed by the financial sponsor and management

3. •

   the acquisition will typically be structured so that the purchaser