Acquisition finance—introductory guide
Acquisition finance—introductory guide

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Acquisition finance—introductory guide
  • Understanding key terminology
  • What is meant by the term acquisition finance?
  • What parties are involved on an acquisition finance transaction?
  • What is the typical structure on an acquisition finance transaction?
  • What are the key documents on an acquisition finance transaction?
  • What are the main stages of a typical acquisition finance transaction?
  • What are the key areas of law to be aware of?

This Practice Note is intended as an introductory guide to acquisition finance for those with no, or limited knowledge of the area. It explains:

  1. what acquisition finance is

  2. parties and documents on an acquisition finance transaction

  3. how acquisition finance transactions are typically structured

  4. the main stages of an acquisition finance transaction, and

  5. the key areas of relevant law

It also contains links to relevant resources within Lexis®PSL.

Understanding key terminology

There is a large amount of terminology and jargon on acquisition finance transactions. For an explanation of commonly used terms, see Practice Note: Glossary of acquisition finance terms and jargon. It may be helpful to read this Practice Note in conjunction with the glossary.

What is meant by the term acquisition finance?

Acquisition finance transaction

The term 'acquisition finance transaction' is usually used to describe an acquisition of a business substantially funded by debt which has been specially raised for the purpose of making the acquisition. The term 'acquisition finance' describes the debt finance raised from banks and other institutions that invest in acquisition finance transactions.

Acquisition finance is primarily associated with leveraged buy-outs (known as LBOs), ie private-equity sponsored acquisitions of businesses where the acquisition is funded by a mixture of debt and equity invested by the sponsor. Corporate purchasers will often raise equity or use existing