Financing an acquisition—share and asset purchases
Financing an acquisition—share and asset purchases

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Financing an acquisition—share and asset purchases
  • Debt or equity?
  • Debt financing
  • Equity financing
  • Factors in choosing debt or equity finance
  • Bank loans
  • Bilateral or syndicated
  • Term loan, revolving credit facility or overdraft facility
  • Loan notes and other debt securities
  • Loan notes
  • More...

The buyer may fund the acquisition by way of:

  1. cash: from its internal cash resources (or those of its parent or other group company)

  2. debt financing: raising capital from a bank loan or by issuing lenders with debt securities (including loan notes), or

  3. equity financing: raising capital from a further offer of its equity securities, in the form of an open offer, rights issue, cash placing, cash box placing or vendor placing

Debt or equity?

Debt financing

Raising capital for an acquisition through debt finance can broadly be split into two main types:

  1. bank loans: various types of facility (generally either a term loan facility or revolving credit facility) provided by either a single lender (bilateral loan) or a syndicate of lenders (syndicated loan)

  2. debt securities: financial instruments issued to create or evidence capital indebtedness, most commonly in the form of loan notes but also in many other forms (warrants, bonds etc, as summarised below)

Equity financing

Raising capital for an acquisition from a further offer of the buyer's equity securities may take the form of a pre-emptive offer to existing shareholders of the buyer, either through:

  1. an open offer, or

  2. a rights issue

Alternatively, the capital may be raised by making a non-pre-emptive offer to investors by way of one of the following types of placing:

  1. cash placing

  2. cash box placing, or

  3. vendor placing

Factors in choosing debt or equity

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