I got a question regardingFinancing.
(1) A PE firm collects cash in one of its funds, say fund A that has now money for more than one acquisition.
(2) The firm finds an attractive target T and wants to buy it.
Now what I don’t get is…what comes first? How can you buy the company with the equity tranche from fund and debt tranche from HYB/ loans, when you don’t own the company yet and can’t load it with that debt?
Does the PE firm create a fund A1 that (1) issues bonds/ takes loans secured by pretty much nothing else than the plan to buy the target T and then (2) uses that money with the equity tranche to buy the target and merge it with theof fund A1, in order to have the debt on the companies ? In that case fund A would own (besides its remaining cash for further transactions) the equity of the combined entity fund A1/target.
Is this correct?
I hope I have explained my question so that you guys may understand it.
Thanks a lot!