In pursuing a corporate merger or acquisition, entrepreneurs of middle market companies need to consider a number of key factors. These include the opportunities for growth and development with the target company, the purchasing price and the mode of financing such business venture. A fundamental mistake that such entrepreneurs make is to concentrate on an attractive and lucrative purchase price while undermining the strategic importance of the business enterprise’s growth plans. Moreover, for such entrepreneurs, securing the capital to finance such a venture along with favorable financial terms from financial institutions can be a daunting and challenging task. This is the reason why such entrepreneurs employ the services of professional merger and acquisition specialists to assist them in this task.
In America, Generational Equity is a reputed and leading middle-market merger and acquisition advisory firm that assists the entrepreneurs of this market segment in taking advantage of merger and acquisition opportunities. The financial specialists from this prominent merger and acquisition firm help their clients in relevant areas of stock sale, asset sale, acquisitions, mergers and divestitures. Most entrepreneurs in middle market segment are unaware of the modes of financing a corporate merger or acquisition in spite of the fact this is the most important financial venture that occur during the lifetime of such businesses. In many case such entrepreneurs do not even have an effective exit strategy that results in a considerably reduction in the value of their business enterprise when they sell it at the wrong time or due lack of adequate information.
The merger and acquisition experts at this reputed merger and acquisition firm emphasize that there are three predominant ways to finance a merger and acquisition in the middle market sector. These include:
Financing acquisition and mergers with debt capital: Debt capital is a simply a loan from creditors, who are willing to finance the venture against the security of assets that a company has in its books. The terms of such loans vary from short-term to long-term along the interest rates. Moreover, the creditors of a company do not have any stake in the company’s ownership. However, business enterprises with a few tangible assets should not finance their mergers and acquisition deals with debt capital.
Financing acquisition and mergers using equity capital: Most small and middle market companies owned and managed by close family members with large amount of equity shares to distribute. By selling all or a certain percentage of this equity to the public, these companies can raise the necessary capital funds to finance their mergers or acquisition.
Financing acquisition and mergers using convertible debt: For middle market companies that come under the category of high risk or that need a merger and acquisition specialist, who turn such enterprises into a lucrative companies, can use a combination of debt and equity. However, such financial deals are complex and require some benchmark parameters. In addition to the company issuing loans against the security of assets to creditors, many debts holders in the company may become investors by converting their debt into equity.
The experts at Generational Equity assist their clients with the appropriate mode of financing their mergers and acquisition according to the needs of the company.