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Mergers, Acquisitions & Investment Banking for Mid-Market Business Owners
Fund An Acquisition
In finance, leverage (or gearing) is the use of given resources in such a way that the potential positive or negative outcome is magnified. Leverage generally refers to using borrowed funds, or debt, so as to attempt to increase the returns on equity. Funding an Acquisition is one use of financial leverage that has received praise as a means of acquiring a company or assets. Financial leverage takes the form of a loan or other borrowings (debt), the proceeds of which are reinvested with the intent to earn a greater rate of return than the cost of interest. Depending on the financial condition of the acquiring company or principals, there are several sources available to Fund an Acquisition, including, but not limited to, conventional bank financing, mezzanine capital, capital raise and leverage buy out of the seller. Financial sponsors (owners) may seek to support Funding an Acquisition in order to reduce the amount they or their companies personally invest. An early-stage company may choose to Fund an Acquisition of an existing company if the principals do not have sufficient assets to collateralize the acquisition.
 
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