An acquisition is when one company purchases most or all of another company’s shares to gain control of that company. Companies acquire other companies for various reasons. They may seek economies of scale, diversification, greater market share, increased synergy, cost reductions, or new niche offerings.

But there’s more than one way to fund an acquisition than simply using company funds. The right business acquisition finance depends on your business and the business being acquired.

It’s important to know, acquisition funding can be tailored to your business and multifaceted solutions can be designed to fit in your business strategy so that you can grow and develop in a sustainable way. Alongside general purchase funding, here are the options available to you:

Leveraged Buyout (LBO)

LBO’s enable business owners to acquire funding for their acquisition by using leverage on the business being purchased. This is a great way for businesses with a healthy cash flow and good projections to fund an acquisition.  If this is done properly it can be a good growth strategy with high returns.

Management Buyout (MBO)

A management buyout (MBO) is a corporate finance transaction where the management team of an operating company acquires the business by borrowing money to buy out the current owner(s).

In an MBO transaction, the management team believes they can use their expertise to grow the business, improve its operations, and generate a return on their investment.

An MBO is considered a low risk investment. This is because anyone buying an acquisition in this way has done a thorough due diligence, including a financial model and an analysis of the companies current performance along with projections for future growth.

 

Acquisition funding can be complex, you will probably have a lot of questions before committing to your new venture. The team at Moorgate Finance are here to provide you with guidance and in-depth knowledge and expertise to support you through the process. For more information contact us: 01908 92 62 62/ info@moorgatefinance.co.uk.