On an acquisition finance transaction, the borrowing group, in addition to the debt (whether loans or bonds) required to fund the transaction, will typically need other types of bank facilities. These may include, for example, an overdraft, stand-by letter of credit facility or foreign exchange facility and can often all be provided under the umbrella of a revolving credit facility (RCF) in the senior facilities agreement (SFA). The RCF will normally be able to be drawn in three different ways: • in cash (in the form of revolving loans) • as syndicated non-cash facilities, eg letters of credit—these will be specified in the documentation, and • in the form of bilateral facilities known as ancillary facilities Unlike a revolving credit facility drawn in cash, ancillary facilities are not normally of a type that would be suitable for dividing up amongst several lenders. The documentation therefore caters for them to be provided bilaterally. For more information on the revolving credit facility, in particular how revolving loans work, see Practice Note: Senior facilities. This

Any transaction that involves more than one class of creditor will typically need an intercreditor agreement to be put in place. The arrival of different kinds of financing structures and types of debt, including bank/bond structures and unitranche facilities, has given rise to a greater variety of intercreditor arrangements. This Practice Note: • gives a basic introduction to the common creditor classes in leveraged finance transactions • explains their key rights and controls under a typical leveraged intercreditor agreement, and • sets out some common structures and creditor combinations The Loan Market Association (LMA) intercreditor agreements are often used as a starting point for documenting intercreditor arrangements in leveraged finance transactions. The LMA had developed intercreditor agreements for: • leveraged finance transactions involving senior and mezzanine debt • leveraged finance transactions involving a super senior revolving facility and senior secured notes • leveraged finance transactions involving a super senior revolving facility and both senior secured and high yield notes, and • leveraged finance transactions involving a super senior revolving facility and term

This Practice Note provides a basic introduction to the key parties and documents involved in an acquisition finance transaction together with links for more detailed information. For an introductory guide to acquisition finance, see Practice Note: Introductory guide to acquisition finance. For a glossary of acquisition finance terms and jargon, see the Glossary of acquisition finance terms and jargon. Key parties in an acquisition finance transaction The parties to an acquisition finance transaction will depend on the nature and structure of the transaction and how it is funded. This Practice Note provides information on: • the buyer, ie the private equity house (sponsor) and special purpose vehicles (SPV) through which it makes the purchase • seller • debt providers, and • the target and its subsidiaries Purchaser Sponsor The sponsor is the private equity firm that provides the equity portion of the funding needed for the purchase. The sponsor may be captive, ie part of a large institution such as a bank. Alternatively, it can be independent, ie owned and managed by senior

It is common for facility agreements to require the borrower(s) to prepay all or part of the facility on the occurrence of certain events, known as mandatory prepayment events. For a general discussion of common mandatory prepayment events, see Practice Note: Repayment, prepayment and cancellation. Leveraged facilities agreements have traditionally contained a more extensive list of mandatory prepayment events than an investment grade loan agreement. Mandatory prepayment events on leveraged finance transactions have typically included: • illegality—where it becomes illegal for a lender to continue to fund its participation, this triggers mandatory prepayment of that lender's participation • change of control/exit—where the sponsor(s) no longer controls the business, this triggers mandatory prepayment of all the facilities (see Acquisition finance—mandatory and voluntary prepayment clauses below) • receipt by the group of disposal proceeds, proceeds of insurance claims and proceeds of claims under acquisition documents (proceeds)—this obliges the group to apply the proceeds towards prepayment of the facilities (subject to exceptions) (see Proceeds below), and • excess cashflow in the group as evidenced

This Practice Note covers the typical characteristics of the mezzanine facility and explains the key changes needed to turn a senior facilities agreement into a mezzanine facility agreement on an acquisition finance transaction. For an introductory guide to acquisition and leveraged finance, see Practice Note: Introductory guide to acquisition finance and for an explanation of commonly used jargon, see: Glossary of acquisition finance terms and jargon. For information on the use of mezzanine facilities in real estate finance transactions, see Practice Note: Senior loans, mezzanine loans and intercreditor arrangements in real estate finance. What is mezzanine debt? The mezzanine facility is a form of finance that ranks after the senior facilities. It is sometimes used in leveraged finance transactions: • to make up any shortfall in the purchase price when the senior facilities and equity investment (and any other funding) are combined, and • to access certain kinds of lenders who prefer to invest in mezzanine which is higher risk and higher reward rather than senior debt Mezzanine is generally provided by institutional investors such as funds that invest in

What does this guide cover? This guide introduces the key aspects of acquisition finance and acts as a guide to our Banking & Finance resources for those with no, or limited knowledge of the area. It covers what is meant by acquisition finance, key terminology, features, parties and documents and key tasks for acquisition finance lawyers. For a more detailed introduction to Acquisition Finance, see Practice Note: Introductory guide to acquisition finance. For a more general guide to our banking and finance resources, see: Banking & Finance—new starter guide. What is meant by acquisition finance? The purchaser of a business will usually need external funding (such as loans) as well as its own funds for the purchase. At its simplest, acquisition finance is the term used to describe the debt element of the funding for the acquisition of a business. Acquisition finance is usually associated with leveraged buy-outs and the terms acquisition and leveraged finance are often used interchangeably. A leveraged buy-out is where the buyer, typically a private equity firm, acquires a business

This Practice Note discusses: • the purpose of and typical representations in a leveraged senior facilities agreement (SFA) and how these differ from those in an investment grade facility agreement • common ways for the sponsor to attempt to limit the scope of the representations • when representations are typically given • purpose of and typical information undertakings in a leveraged SFA • purpose of and typical general undertakings in a leveraged SFA • the use of 'baskets' to limit the impact of the general undertakings • purpose of and typical events of default The information in this Practice Note assumes an SFA in a similar form to the senior multicurrency term and revolving facilities agreement for use on leveraged acquisition finance transactions available to members on the LMA website (LMA Leveraged SFA). For information on other aspects of a leveraged finance facilities agreement, see Practice Note: Introductory guide to leveraged finance facilities agreements. For more information on the terms used in this Practice Note, see: Glossary of acquisition finance terms

What is second lien financing? Second lien financing is a form of financing that is principally secured by the same security package as senior or first ranking debt, but ranks behind such senior or first ranking debt (whether in priority of payment and/or security; for further detail, see: Intercreditor position section below) on a second ranking basis. It serves as a layer of debt between senior bank debt facilities and other junior or subordinated debt in a leveraged buy-out. Second lien debt usually takes the form of term loans (or notes in the US). Investors in second lien debt are generally institutional investors such as funds that invest in leveraged loans, collateralised loan obligations (CLOs), hedge funds and other specialist debt funds. Second lien financing is sometimes used in leveraged acquisition finance transactions: • as a useful addition to the capital structure to make up any shortfall in the purchase price when the senior facilities and equity investment (and any other funding) are combined • to increase leverage multiples in the acquisition

This Practice Note is intended as an introduction to facilities typically contained in a leveraged senior facilities agreement (SFA) and covers: • the main characteristics of each type of senior facility • typical senior lenders • documenting the terms of the senior facilities, and • the security and intercreditor position of senior facilities. For an introductory guide to acquisition and leveraged finance, see Practice Note: Introductory guide to acquisition finance. For more detail on typical terms applicable to senior facilities, see Practice Note: Introductory guide to leveraged finance facilities agreements. An explanation of many of the terms used in this Practice Note can be found in the Glossary of acquisition finance terms and jargon. Overview of senior facilities The senior facilities that may be provided to the group can broadly be divided into three types: • the main term facilities, used for the acquisition (or refinancing or recapitalisation, as applicable) • other term facilities eg incremental facilities, capex and/or further acquisition facilities, and • working capital facility in the form of a revolving credit facility (RCF) Transaction

TMT analysis: The Court of Justice considered the acquisition and use of bulk communications data by the intelligence and security agencies in the UK, and how those practices interacted with EU law. The Court of Justice held that, notwithstanding that measures applied under UK legislation to obtain mass data sets from telecoms and internet providers were in the name of national security, the measures must nevertheless comply with European law, specifically in relation to data protection and privacy. The Court of Justice went on to decide that the measures adopted by the UK exceeded the limits of what was strictly relevant and could not be justified as being proportionate or necessary in a democratic society. This judgment will have an effect not just on the privacy standards surrounding this specific data collection, but on the UK's privacy standards generally, and the hope of obtaining an 'adequacy decision' prior to the end of the Brexit transition period. Written by Charlotte Clayson, partner, at Trowers & Hamlins LLP.

This Checklist is for use where you are acting for the buyer on the acquisition of a registered freehold or leasehold commercial property either with vacant possession or subject to a lease or leases. It is not exhaustive and will not cover every eventuality for every transaction. You must always consider whether there are any other issues that need to be addressed. It is assumed that: • the property is not subject to any residential tenancies, and • the seller is solvent This Checklist includes the following key sections: • Preliminary matters • Is the buyer using finance to acquire the property? • Before exchange of contracts • Are you ready to exchange? • Exchange of contracts • Post exchange steps • Between exchange and completion • Are you ready to complete? • Completion • Post completion Preliminary matters See also Practice Note: Transferring commercial property—a practical guide — Preliminary matters. Are the buyer’s instructions and proposals for the property clear? Effective due diligence and transaction management require a sound understanding of the buyer’s

Private Client analysis: The First-tier Tribunal (Tax Chamber) dismissed the appeal of Jeremy Coller and found that he, his mother and his father had all acquired a domicile of choice (‘DoC’) in the UK. The tribunal conducted a detailed survey of the relevant case law on acquisition of a DoC. Its application of that law to the facts in this case will be of interest to any practitioner advising clients who are claiming to have maintained a domicile of origin (‘DoO’) overseas notwithstanding long residence in the UK. The tribunal gave careful consideration to how it should approach witness testimony in a domicile case, including the evidence of one witness who had since died. Written by Christopher Stone, Devereux Chambers.