Acquisition and buy-out finance

This structure suits trade buyers, management teams and financial sponsors acquiring a controlling interest in a business with demonstrable, sustainable earnings. It is equally applicable to a single bolt-on acquisition and to a platform strategy involving several transactions over time, provided the combined group's cash flow can service the resulting debt.

It is less suited to pre-revenue or loss-making targets, where equity or venture-style structures are more appropriate, and to situations where the buyer requires completion within days rather than weeks — bridging finance may be needed to cover that gap while the acquisition facility is documented.

Senior debt is priced most conservatively and sits first in the repayment order, typically sized at two to three and a half times normalised EBITDA. Unitranche blends senior and subordinated risk into a single facility with one lender and one set of documents, often used where speed and certainty of funds outweigh the marginally higher blended cost.

Mezzanine or vendor loan notes bridge any remaining gap between the buyer's equity and the senior or unitranche quantum, typically repaid on exit or refinance and carrying a mix of cash and rolled-up interest. The combination of layers is chosen to fit the buyer's target equity contribution and the target's cash generation.

Lenders underwrite normalised, sustainable EBITDA rather than reported profit, adjusting for one-off items, related-party arrangements and owner's discretionary costs. Customer concentration, contract renewal risk and the depth of the management team below the departing owner are examined closely, particularly in owner-managed businesses.

A quality of earnings report and legal due diligence are generally required before drawdown, though indicative terms and a term sheet can be issued earlier on the basis of management accounts to support negotiation with the seller.

Senior acquisition debt is typically priced at 3–6 per cent over base rate; unitranche commonly at 6–10 per cent reflecting its subordinated and blended nature; mezzanine at 10–16 per cent including any equity-linked return. Arrangement fees of 1–2.5 per cent of facility size are usual, alongside legal and diligence costs borne largely by the buyer.

Pricing is driven by sector resilience, leverage multiple, the granularity of the customer base and whether the seller is prepared to leave capital in via a vendor loan, which lenders generally view favourably as an alignment signal.

GFG reviews the target's financials and the proposed structure, prepares an information memorandum where needed, and approaches senior, unitranche and mezzanine providers, or private equity and family office capital, in parallel to test appetite and terms.

From an indicative term sheet to funds available at completion typically takes six to twelve weeks, dependent on the pace of the buyer's own due diligence and legal negotiation with the seller.