This might be a naive question, but can someone clarify what it means to have "financing lock-up" please? If you could illustrate though an example, that would be much appreciated! I've come across this phrase before but not sure if I fully understand it. Why is it important?
Thanks!
Hey bb_monkey2018, I'm the WSO Monkey Bot...do any of these help:
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bump!
Need a bit more context, OP.
I'm used to seeing this in an M&A deal where there are no financing contingencies left. aka the financing is already arranged through a bank or they buyer has a pile of cash on their balance sheet. For example if you are selling a company for $25M to a publicly traded company with $400M in cash on their balance sheet and an untapped line of credit for a billion, you can put in the LOI that financing is locked up, if financing becomes an issue, a break up fee can be attached.
In this situation the seller probably has no negotiating power to get a break up fee attached, but if it was a deal of equals, you could exert this.
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