What Is Acquisition Finance?
- Acquisition financing is the funding a company uses specifically for the purpose of acquiring another company.
- By acquiring another company, a smaller company can increase the size of its operations and benefit from the economies of scale achieved through the purchase.
- Bank loans, lines of credit, and loans from private lenders are all common choices for acquisition financing.
- Other types of acquisition financing including Small Business Association (SBA) loans, debt security, and owner financing.
Types of Purchasers
Strategic investors: Corporate purchasers acquire competitors ("market shares"), complementary businesses or non-related businesses (diversification).
Financial investors:
Collective investments (e.g., from insurance companies, pension funds, general investment funds, individuals - "family offices") pooled in private equity funds acquire companies/ businesses with the aim of achieving an attractive rate of return through a sale within a limited period of time.
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