Acquisition Finance

Acquisition finance is funding used to help a business acquire another company or its assets. It can be structured using debt, equity or a combination of both, depending on the size of the transaction and the needs of the business.

Every acquisition is different, so the right acquisition finance solution depends on factors such as the target business, transaction structure, available security and future growth plans. At Shawbrook, we structure tailored acquisition finance to support successful M&A while aligning repayments with the needs of the business.

Acquisition finance helps businesses complete acquisitions without relying solely on existing cash reserves. It can preserve working capital, spread the cost of a transaction over time and provide greater flexibility than funding an acquisition entirely through equity.

The right funding solution can support acquisitions that increase market share, expand products or services, strengthen existing capabilities and accelerate long-term growth.

Acquisition finance works by structuring funding around the needs of both the acquiring business and the transaction. Depending on the deal, funding may involve debt, equity or a combination of both.

Before offering funding, lenders will assess factors such as the financial strength of the acquiring business, the target business, cashflow, profitability and the overall transaction structure. This helps ensure the funding is appropriate for both the acquisition and the business's future growth plans.

There are several ways to finance a business acquisition. The right approach will depend on the size, complexity and structure of the transaction.

• Debt finance - Borrowing from a bank or specialist lender, with repayments typically structured around the cashflow of the business. 
• Equity finance - Raising capital from investors in exchange for a share of ownership. 
• Seller finance (vendor finance) - Where the seller agrees to receive part of the purchase price over time, rather than in full at completion. 
• Earn-out - Where part of the purchase price is linked to the future performance of the acquired business. 
• A combination of debt and equity - Many acquisitions are funded using a blend of debt and equity to balance risk, preserve cashflow and meet the needs of the transaction. 

At Shawbrook, we work with businesses, advisers and investors to structure tailored debt funding solutions using Asset Based Lending, Corporate Leverage Finance or Unitranche, alongside equity where appropriate.

Acquisition finance is typically suitable for businesses looking to acquire another business to support long-term growth. This may include acquiring a competitor, expanding into new markets or strengthening existing capabilities through M&A.

At Shawbrook, we typically support established UK businesses that have been trading for more than three years and generate at least £1m EBITDA. We provide multi-million-pound funding solutions, working closely with businesses, advisers and financial sponsors to structure funding for larger acquisition transactions.

A carve-out acquisition is where a business acquires a division, subsidiary or part of another company, rather than the whole business. As the acquired business separates from its parent company, it may need to establish its own systems, contracts, operations and working capital arrangements.

This can make financing a carve-out more complex than a typical acquisition. Funding may be needed not only to support the purchase itself, but also to provide liquidity during the transition to standalone operations and support the business as it stabilises and grows.

Businesses pursue M&A for many reasons, including:

• Increase market share - Expand your customer base, strengthen your competitive position or enter new geographic markets.
• Expand your offering - Add complementary products, services or capabilities without developing them organically.
• Access expertise or technology - Acquire intellectual property, operational capabilities or specialist knowledge that would take years to build in-house.
• Strengthen your team - Bring in experienced people with valuable sector expertise, customer relationships or technical skills.
• Improve efficiency - Create economies of scale by combining operations, reducing costs or increasing purchasing power.
• Accelerate growth - Acquiring an established business can often be a faster route to growth than expanding organically.