Business Acquisition Financing
Buying a business is not just a commercial decision. It is a capital structure decision. The difference between a deal that closes and one that falls apart at the financing stage is rarely the quality of the target. It is usually the structure of the debt, the mix of instruments used to fund it, and whether the advisor running the capital raise has the right lender relationships for the specific transaction in front of them.
Financely structures and places acquisition financing across the full capital stack. We can source up to 85% of the acquisition consideration through senior debt, mezzanine, unitranche, or a combination of all three. For independent sponsors working without committed capital, we can raise the entire acquisition amount alongside co-investors and structure the sponsor's compensation as part of the transaction.
Acquisition Finance at a Glance
The Capital Structure We Build Around Your Acquisition
Every acquisition financing starts with a capital structure question: how much debt can the target sustainably service from its cash flows, and how should that debt be layered to balance cost, flexibility, and lender appetite? The answer varies by target sector, EBITDA margin, revenue visibility, asset base, and the buyer's own equity contribution. We assess these factors before recommending a structure and before approaching any lender.
The Three Instruments We Place
Senior Secured Debt
Senior debt is sized against the target's maintainable EBITDA, asset base, and cash conversion profile. We place senior acquisition facilities with direct lending funds, regional banks, and specialist acquisition finance lenders depending on deal size and sector. Term loan A structures with amortisation and term loan B structures with bullet repayment are both available depending on buyer preference and lender appetite.
Typical leverage: 3.0x to 4.5x EBITDA. Typical pricing: base rate plus 350 to 600 bps depending on leverage and credit quality. Typical tenor: 5 to 7 years.
Mezzanine Debt
Mezzanine is placed with specialist subordinated debt funds and family office lenders who understand the risk-return profile of the position. It is used when senior debt alone does not cover enough of the consideration and the equity gap cannot be closed without an additional debt layer. We structure the instrument, negotiate the PIK versus cash pay split, and handle warrant or co-investment terms on the sponsor's behalf.
Typical leverage: adds 1.0x to 2.0x EBITDA on top of senior. Typical all-in cost: 12 to 18% including PIK and warrant value. Typical tenor: 6 to 8 years with limited amortisation.
Unitranche
For mid-market transactions where execution speed and structural simplicity are a priority, unitranche is the most efficient solution. A single credit agreement, a single set of covenants, and a single lender relationship means fewer points of failure between signing and close. We place unitranche facilities with direct lending funds that have active mandates in the relevant deal size range and sector.
Typical leverage: up to 5.0x to 6.0x EBITDA on quality businesses. Typical all-in cost: blended rate between senior and mezzanine, typically base rate plus 550 to 800 bps. Typical tenor: 5 to 7 years.
Combined Structures
For transactions where maximum leverage is required, we layer senior debt and mezzanine to reach up to 85% of acquisition consideration. The senior and mezzanine lenders operate under an intercreditor agreement that governs their respective rights in a downside scenario. We manage the intercreditor negotiation and lender coordination to avoid the delays that typically arise when two lending groups are working from different sets of interests.
Combined structures are used where the target has strong, predictable cash flows that can service a layered debt stack and where the acquisition multiple supports the aggregate leverage without breaching serviceability thresholds.
For Independent Sponsors: Raising the Full Acquisition Amount
Independent sponsors occupy a distinct position in the acquisition market. They source opportunities, conduct due diligence, negotiate terms, and drive value creation without the institutional infrastructure of a committed fund. The capital raise happens deal by deal, which means the sponsor's ability to close is contingent on assembling the right combination of debt and equity quickly enough to hold a signed purchase agreement together.
Full Capital Raise for Independent Sponsors
In exceptional cases where the deal quality, the sponsor's track record, and the target's financial profile support it, Financely can raise the entire acquisition amount. This means sourcing both the debt financing and the co-equity from our network of co-investors, family offices, and institutional partners who participate alongside the sponsor in a deal-by-deal capacity.
The sponsor's compensation, including their acquisition fee, management fee during the hold period, and carried interest on exit, is agreed and documented with co-investors as part of the capital raise process. There is no ambiguity about economics: everything is on the table before any co-investor commits capital, and the sponsor knows exactly what they will earn at each stage of the investment lifecycle before the deal closes.
This structure is not available to every sponsor or every transaction. We apply the same credit and commercial rigour to evaluating an independent sponsor's deal as we apply to any other acquisition financing. The target must have defensible cash flows, the purchase price must be supportable at the implied leverage, and the sponsor must have a credible value creation plan that co-investors can underwrite. Where those conditions are met, we move quickly.
On sponsor economics: The most common point of friction in independent sponsor deals is the negotiation between the sponsor and co-investors over economics. Sponsors who arrive at that conversation with a clear, pre-documented compensation structure are consistently more successful than those who treat it as a secondary issue. We encourage every independent sponsor we work with to have their economics proposal ready before the first co-investor conversation, not after. We can advise on market-standard compensation structures based on deal size, hold period, and sector.
Transaction Types We Finance
Acquisition financing applies across a range of transaction structures. The debt instrument and capital structure will differ depending on the specific type of deal, but the core advisory and placement process is consistent across all of them.
Management Buyouts
An incumbent management team acquiring the business from its current owner, typically a corporate seller, a retiring founder, or a private equity fund reaching the end of its hold period. Management brings operational knowledge and continuity. Financely provides the debt structure and, where the management team's equity contribution is insufficient, introduces co-investors to fill the equity gap alongside a leveraged debt package.
Management Buy-ins
An external management team acquiring a business they have identified but are not yet running. MBI transactions carry higher execution risk than MBOs because the incoming team has not yet demonstrated performance in the specific business. Lenders price this risk into their terms. We structure MBI transactions with debt profiles that reflect this dynamic and identify lenders with genuine appetite for the profile rather than those who will decline after a month of due diligence.
Private Equity Sponsor Acquisitions
Buyout funds acquiring platform companies or add-on acquisitions for existing portfolio companies. We work with both established mid-market funds and first-time fund managers who require a placement partner with lender access beyond their existing relationships. Add-on acquisitions with an existing portfolio company as the borrowing base often support higher leverage than standalone acquisitions and benefit from the operational platform already in place.
Corporate Acquisitions
A trading company acquiring a competitor, a supplier, or an adjacent business to accelerate growth, achieve vertical integration, or enter a new market. Corporate acquirers typically have an existing banking relationship but may need additional leverage beyond what their house bank will provide, or may need a faster execution timeline than an internal credit approval process can accommodate. We provide complementary acquisition debt that sits alongside or replaces the corporate bank facility.
Founder Buyouts and Succession Transactions
A founder or majority shareholder monetising their stake while maintaining partial ownership or operational involvement. These transactions often involve partial vendor financing alongside third-party debt, a management retention structure, and a longer transition timeline than a clean trade sale. We structure the third-party debt component and coordinate with the vendor on the terms of any seller note or deferred consideration that forms part of the overall financing package.
Secondary Buyouts
A private equity fund selling a portfolio company to another private equity fund. Secondary buyouts are typically the most straightforward to finance because the target has an established track record of operating under institutional ownership, audited financials prepared to institutional standards, and a management team with buyout experience. Lenders are generally more comfortable with secondary transactions than with primary buyouts from founder or corporate sellers.
What Lenders Assess: How Acquisition Finance Is Underwritten
Structuring a deal correctly before approaching lenders is the difference between a financing that closes in eight weeks and one that spends four months in credit committee and then fails. The following are the primary factors that determine how much a lender will advance, at what cost, and on what terms.
| Underwriting Factor | What Lenders Look At | What Improves the Outcome |
|---|---|---|
| EBITDA quality | Maintainable EBITDA after stripping out one-off items, owner add-backs, and normalisation adjustments. The lender wants to know what the business genuinely earns on a recurring basis under new ownership. | Clean management accounts, a conservative normalisation schedule with auditor support, and a quality of earnings report from a recognised firm if the deal size justifies it. |
| Revenue visibility | The proportion of revenue that is contracted, recurring, or highly predictable versus project-based or discretionary. Higher visibility supports higher leverage and lower pricing. | Documented long-term customer contracts, subscription revenue, or framework agreements. Customer concentration analysis showing no single customer represents more than 20 to 25% of revenue. |
| Cash conversion | The conversion of EBITDA into free cash flow available for debt service after capex and working capital movements. A business with 90% EBITDA-to-FCF conversion services debt very differently from one with 50%. | Low capex intensity relative to EBITDA, a working capital cycle that is neutral or favourable, and a track record of consistent cash generation through the cycle. |
| Management team | Whether the existing management team is staying, what their equity participation is, and whether they have operated under institutional ownership before. Management depth below the CEO level matters for lenders assessing key person risk. | A retained management team with meaningful equity rollover, a clear succession structure, and prior experience of working within a leveraged capital structure. |
| Purchase price and entry multiple | The acquisition multiple implied by the purchase price relative to EBITDA. Higher entry multiples reduce the debt coverage cushion and compress the equity return. Lenders are acutely sensitive to entry price in a market where exit multiples may compress. | A supportable valuation with comparable transaction evidence, vendor due diligence that validates the EBITDA base, and a purchase price that leaves adequate headroom on debt service coverage ratios at the proposed leverage level. |
| Security and asset base | The assets available to secure the debt facility: property, plant and equipment, debtors, intellectual property, and the value of the business as a going concern. Asset-heavy businesses support higher leverage than pure service businesses with no tangible asset base. | A clear asset register, current property valuations if real estate is involved, and a legal structure that allows clean security registration over the target's assets in favour of the lender. |
Scenarios: How We Structure Different Acquisition Profiles
Scenario 1: Mid-market MBO, strong recurring revenue, management rolling equity.
A software business generating £4M EBITDA is being acquired by its management team from a corporate parent at a purchase price of £24M, implying a 6x entry multiple. Management is rolling 10% of the consideration as equity, creating a £2.4M equity contribution. The remaining £21.6M needs to come from third-party debt. We structure a unitranche facility of £18M at 4.5x EBITDA and introduce a co-investor to cover the remaining £3.6M equity gap alongside management. The unitranche simplifies the capital structure and the co-investor fills the equity shortfall without requiring mezzanine debt that would increase the interest burden on a business the management team will be running lean post-acquisition.
Scenario 2: Independent sponsor, no committed fund, full capital raise.
An independent sponsor has signed a letter of intent to acquire a distribution business at £15M. They have no committed fund and need both the debt and the equity. We place a senior debt facility of £9M at 3.0x EBITDA of the target's £3M normalised EBITDA. We then raise the remaining £6M equity from two family office co-investors. The sponsor's economics are agreed upfront: a 2% acquisition fee paid at close from the equity raise proceeds, a 1.5% annual management fee on invested equity, and 20% carried interest above a preferred return of 8% to co-investors. All of this is documented in the co-investment agreement before the co-investors commit. The deal closes with the sponsor contributing no capital of their own.
Scenario 3: Maximum leverage, layered senior and mezzanine.
A private equity buyer is acquiring an industrial services business at £50M, 8x EBITDA of £6.25M. The fund wants to minimise its equity commitment to maximise return on invested capital. We structure £28M of senior debt at 4.5x EBITDA and £14.5M of mezzanine at an additional 2.3x EBITDA, reaching a combined 6.8x leverage and covering £42.5M of the consideration, or 85% of the purchase price. The remaining £7.5M is the fund's equity. The mezzanine is structured with 60% cash pay and 40% PIK to preserve cash in years one and two while the operational improvement programme runs. The intercreditor agreement governs the enforcement waterfall and the mezzanine provider's standstill obligations in the event of a covenant breach.
Submit Your Acquisition for Financing Assessment
If you have a signed or near-signed acquisition and need debt financing, a full capital raise, or an independent sponsor co-investment structure, submit your deal details and receive a financing assessment within one business day. Include the target's EBITDA, the proposed purchase price, the transaction type, and your equity contribution or funding gap. The more detail you provide, the more specific our assessment will be.
What We Need to Get Started
A complete initial submission allows us to match your transaction to the right lenders and structure a credible financing proposal rather than a generic response. Provide as much of the following as is available at the point of submission.
- Target company name or sector description if confidentiality requires it, along with country of incorporation and jurisdiction of operations
- Last two to three years of audited or management accounts showing revenue, EBITDA, and free cash flow
- Proposed acquisition structure: asset purchase, share purchase, or merger
- Purchase price agreed or under negotiation and the implied EBITDA multiple
- Buyer profile: corporate acquirer, private equity fund, independent sponsor, or management team
- Equity available from the buyer and the financing gap that needs to be filled
- Preferred debt instrument or openness to our recommendation on structure
- Target close timeline and any exclusivity or SPA deadline that affects the financing window
- Any existing lender conversations that are in progress and their current status
Ready to Structure Your Acquisition Financing?
Submit your deal and receive a capital structure recommendation and lender options within one business day. We work with buyers, sponsors, and management teams across all acquisition types and deal sizes from £2M upwards.
Frequently Asked Questions
How much of an acquisition can Financely finance?
Up to 85% of the total acquisition consideration across senior debt, mezzanine, unitranche, or a combination. The remaining 15% minimum must be contributed as equity by the buyer. For independent sponsors with no committed equity, we can raise the full amount by bringing in co-investors alongside the debt, covering the entire consideration with the sponsor's compensation agreed as part of the co-investment structure.
What is the difference between unitranche, senior, and mezzanine?
Senior debt is first-ranking secured at the lowest cost with the most restrictive covenants. Mezzanine is subordinated, more expensive, and often includes PIK and equity warrants. Unitranche combines both into a single instrument at a blended rate, eliminating intercreditor complexity. The right choice depends on deal size, execution timeline, and how much leverage the target's cash flows can support.
How does Financely help independent sponsors?
We can raise both the debt and the co-equity for an independent sponsor's acquisition, covering the full purchase price. The sponsor's acquisition fee, management fee, and carried interest are agreed with co-investors upfront as part of the capital raise. The sponsor closes the deal without contributing their own capital and with their economics fully documented before any investor commits.
What transaction sizes do you work with?
We work with acquisition transactions from approximately £2M or equivalent upwards. Most of the deals we place fall between £5M and £150M. This is the core mid-market and lower mid-market range where unitranche and combined senior-mezzanine structures are most active. Larger transactions are considered on a case-by-case basis.
How long does acquisition financing take to arrange?
A straightforward unitranche or senior debt facility for a clean mid-market acquisition with complete documentation can close in six to ten weeks from first submission. More complex structures involving mezzanine, intercreditor negotiations, or co-investor equity alongside debt require eight to fourteen weeks. Starting the financing conversation the moment an LOI is signed gives the most realistic chance of closing within the exclusivity period.
Do you work with first-time buyers or only experienced acquirers?
We work with both. First-time acquirers typically require more structuring support and benefit from our involvement earlier in the process to ensure the acquisition structure is bankable from the outset. Experienced buyers and sponsor teams with prior deal track records access a wider range of lenders and typically achieve better pricing and more flexible terms. In both cases the quality of the target and the robustness of the underlying financials are the primary drivers of what we can place.
Disclaimer: Financely operates as a finance advisory and deal origination platform. We do not lend directly. All financing decisions are made independently by lenders and co-investors based on their own credit assessment and due diligence. Facility parameters, leverage multiples, and pricing ranges described on this page are indicative and subject to change based on market conditions, transaction specifics, and individual lender mandates. Obtain independent legal and financial advice before committing to any acquisition financing structure.