M&A and Alternative Finance

There are more mergers, acquisitions and successions due to retirement happening today than we’ve seen in a while and it’s surprising that alternative financing isn’t considered more often as a tool in the process. For starters it makes it a lot easier to quickly figure out the true value of the tangible assets so that more attention can be paid to the intangible and more difficult ones.

Whether buying or selling, the transparency that Asset Based Lending (ABL) provides offers benefits to all parties. It saves everyone time and expense and allows negotiations to focus on getting a deal done. The added benefits and flexibility more than offset the additional cost.

A business that uses ABL is in effect being audited every day. The lender or lenders involved have hands on the assets and are expert in managing them, their numbers can be relied on.  So much so that they’ve even put their money on it.

With the greater leverage that ABL offers it can often generate an injection of new working capital.  This can be used to take out reluctant investors, pay off high interest loans and aggressively lower payables.  In general terms, to clean house and improve the balance sheet.

Some cash flow lenders look at a change in ownership as a start up, which can mean a year or two before it’s taken seriously.  If this is a problem for the new owners then the ABL facility is able to support them during that process and even through rapid growth if needed.

Personal guarantees (PGs) can sometimes be problematic, and most sellers like to be rid of theirs as soon as the sale closes. With ABL financing the payout figure is easy to figure out and if there is any vendor financing it can used as a tool to manage that. It can help the transfer of ownership go smoothly.     

I think M&A advisors miss opportunities to suggest alternative financing in the Buy/Sell process when it might make a difference.  I would love your feedback.  Let’s have a chat about a deal or alternative finance in general.  Book a Call and let’s get started.