{"id":3631,"date":"2020-10-13T08:22:58","date_gmt":"2020-10-13T13:22:58","guid":{"rendered":"https:\/\/lqdfinance.com\/?post_type=insights&p=3631"},"modified":"2020-12-03T14:01:27","modified_gmt":"2020-12-03T20:01:27","slug":"merger-and-acquisition-financing-ways-to-structure-an-acquisition-deal-for-your-business","status":"publish","type":"insights","link":"https:\/\/lqdfinance.com\/insights\/merger-and-acquisition-financing-ways-to-structure-an-acquisition-deal-for-your-business\/","title":{"rendered":"Merger and Acquisition Financing: Ways To Structure an Acquisition Deal for Your Business"},"content":{"rendered":"

Whether you want to enter a new market and hit the ground running or plan to buy out a competitor, business acquisitions can provide the solutions you need. Unless you or your business already possess cash in hand for the purchase, you may need a business acquisition loan to seal the deal<\/a>.<\/span><\/p>\n

Whether you choose this route or not, it is essential to remember that there is no one right way to go about business acquisition financing. Instead, it would be best if you considered how each available option might complement your business needs.<\/span><\/p>\n

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5 Business Acquisition Finance Options<\/b><\/h2>\n

Choosing the best structure for an acquisition deal goes far beyond just what the business or its owners can afford. Each option available comes with its own pros and cons. In turn, these factors can affect the ease of negotiations, the viability of the acquisition, and the deal’s success.<\/span><\/p>\n

1. Stock Purchase<\/b><\/h3>\n

Stock purchases<\/span><\/a> are one standard method of structuring an acquisition. When business owners choose to acquire a company this way, the stock price can affect how feasible the deal turns out to be. The willingness of stockholders to sell may also pose a problem. Not all companies have stock for sale. When applicable, once successfully acquired via this method, the company remains intact but under new ownership. The new owners assume all risks.<\/span><\/p>\n

2. Asset Purchase<\/b><\/h3>\n

When business owners only want to purchase a specific product line or department, asset purchase is more appropriate rather than acquiring an entire business. This acquisition structure makes it possible to pin-point the particular assets and liabilities purchased. Despite the added complexity, buyers seek this option because it allows the ultimate flexibility for sweetening the deal in their favor. However, some sellers are not in favor of this option due to potential tax consequences and other financial impacts.<\/span><\/p>\n

3. Seller Financing<\/b><\/h3>\n

Not every business has cash in hand to purchase a business. Getting an acquisition loan is not always easy either. This is especially the case if lenders do not believe the company for sale is worth the price. In these instances, seller financing may become a viable option. Also known as a vendor take-back loan, it allows the seller to maintain ownership until the buyer pays. Options may include earn-outs, seller notes, or delayed payments. This <\/span>can sometimes prove less expensive<\/span><\/a> than going through a traditional bank, but that depends on the seller and the market.<\/span><\/p>\n

4. Leveraged Buyout<\/b><\/h3>\n

One of the most common methods of financing an acquisition is to use a unique blend of debt and equity. When choosing this method, business owners may need to prepare to see their existing business assets become collateral for the purchase. This may require first clearing any prior claims on these assets. Companies that choose this option generally have great cash flow and a solid foundation in assets.<\/span><\/p>\n

5. Merger<\/b><\/h3>\n

When a business merger takes place, two companies become one new organization. There are several different ways to create the final, conjoined company. The existing relationship between the two companies can make <\/span>different types of mergers<\/span><\/a>:<\/span><\/p>\n