Acquisition Financing - Some Questions
hey, boys. i've got some dorky questions on acquisition financing and would love some thoughts. in this context, i mean acquisition financing from the perspective of a bank making a loan to a client that wants to use that loan to purchase a business
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How large does a financial institution have to be to provide acquisition financing? Naturally this depends on the size of the targets but is there some rule/regulation that restricts acquisition financing to a certain percentage of AUM or so?
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What kind of interest rate can you charge on acquisition financing loans? Are they on the higher end due to the (i'm assuming) higher risk of acquisition financing loans?
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What considerations are there for a bank that wants to begin making acquisition finance loans?
thank you in advance, friends
All right, if you are already at a Bank you should be knowing all the above but I il give you the benefit of the doubt here.
1/ No particular size restriction that I know of… most small bank take a smaller piece of the loan pie in syndicated deals, also since the financing is against the target company’s assets and CF, no particular restriction as such on exposure / AUM, however Banks do diversify exposure across industries to have a balance book by duration and industries (to have some counter cyclical ones may be)
2/ Depends right, check with ur Levfin team on trends, depends on what the synthetic ratings / CF, market stat, type of instrument, tenure etc
3/ long tenure sticky deposits, FSG relationships, a risk team that knows how to do credit
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