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LEVERAGED BUYOUTS

Bring acquisition financing together around the transaction you're planning.

Evaluate collateral-backed financing as part of the debt-and-equity structure supporting your acquisition, including the target company's assets and existing obligations.

DEALS WE SUPPORT

The Right Financing Structure Can Turn an Acquisition Into Reality

Acquiring a business often requires capital from multiple sources. Buyers and financial sponsors have to balance their own equity investment with available debt financing, while weighing the acquired company's assets, operating performance and future obligations. In a leveraged buyout (LBO), debt provides a significant part of the purchase price.

Great Elm Commercial Finance provides asset-based and secured financing for middle-market buyouts, including transactions led by private equity firms. Our role is the financing. We do not advise on the deal, value the business or invest equity, so buyers continue to work with their own advisors.

Executives seated around a conference table during a transaction meeting

COMMON FINANCING CHALLENGES

Where Buyout Financing Becomes Complex

A buyout puts several demands on the financing at once. These are the conditions that most often complicate funding an acquisition.

The acquisition price may exceed what senior borrowing against the business can provide. The difference has to come from sponsor equity or additional capital, and the financing has to be sized before the deal can close.

Lenders require diligence on the target's financial results and on the collateral that would support the loan. The findings affect how much financing is available and on what terms.

The target's current loans and liens generally have to be repaid or addressed as part of the transaction, which reduces the proceeds available for the purchase and adds steps to closing.

Financing commitments, approvals and loan documentation all have to line up with the deal's closing date. A gap in any of them can delay or complicate the transaction.

FINANCING CONSIDERATIONS

Capital Structure and Transaction Considerations

A buyout financing starts with how the transaction is funded. The sources and uses of funds show how much debt the deal needs, and the target's collateral and cash flow show how much it can support.

Great Elm works with entrepreneurs, private equity firms and investment banks, and typical borrowers have annual revenue between $5MM and $500MM. Buyers, sponsors and their advisors can share the transaction structure and the sources and uses, and our team will discuss how a facility could be built around them. Every opportunity is evaluated on its own terms, and nothing here is a commitment to lend.

What a Buyout Financing Must Account For

  • Sources and uses of funds: purchase consideration, sponsor equity, acquisition debt, repayment of existing debt and transaction expenses
  • Post-closing liquidity: the working capital the business needs once the transaction has closed
  • Collateral: the eligible assets that can support the financing
  • Debt priorities and repayment capacity: how senior and subordinated layers rank, and whether cash flow supports the obligations

RELEVANT FINANCING SOLUTIONS

Financing Options for Leveraged Buyouts

Which structure fits depends on the target's collateral, cash flow and the proposed capital structure. Each product page explains the mechanics.

Unitranche Loans

Consolidated, borrower-facing debt financing that can combine senior and subordinated capital in a single facility for a major transaction.

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Junior Capital Loans

Supplemental subordinated financing that works alongside a senior asset-based facility when additional capital is appropriate.

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Secured Term Loans

Term financing supported by eligible collateral, including assets related to the acquisition.

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Recent Deals

Financing deals that move businesses forward.

Explore our recent financing transactions and discover how we’re helping businesses access the capital they need to grow and succeed.

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FREQUENTLY ASKED QUESTIONS

Leveraged Buyout (LBO) Financing FAQs

Answers to common questions about how buyout financing is structured and how existing obligations affect a closing.

Acquisition debt can be a single senior facility, a combination of senior and subordinated debt, or a unitranche loan that combines them. The right structure depends on the target's collateral and cash flow, the equity being invested and the priorities of each lender. Each Great Elm product page explains how its structure works.

Senior financing is repaid first and is generally secured by the company's assets. Junior capital sits behind the senior facility and ahead of ownership interests, which can add capital beyond what senior borrowing alone provides. Great Elm's Junior Capital Loans are structured to work alongside an asset-based senior facility.

Asset-based financing is supported by eligible collateral of the business being acquired, such as accounts receivable, inventory and machinery and equipment. Which assets qualify, and how much financing they support, is determined during diligence.

The target's existing loans and liens generally have to be repaid or addressed at closing, and lender consents may be required. Payoff amounts belong in the sources and uses, and they reduce the proceeds available toward the purchase.

Discuss a Leveraged Buyout Financing Opportunity

Buyers, sponsors and advisors are invited to share the transaction structure, funding requirements and relevant business assets to begin a financing discussion with Great Elm.

Contact Our Financing Team

Tell us about your business and what you’re looking to finance. A member of our team will follow up to discuss your needs and potential next steps.