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Middle Market M: Handbook for Investment Banking and Business Consulting by Michael R. Nall, Christian W. Blees, Robert T. Slee, Kenneth H. Marks

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CHAPTER 15

Financing Sources and Structures

As we have attempted to illustrate throughout this handbook, mergers and acquisitions (M&A) transactions—acquiring, recapitalizing, or divesting (exiting)—can be viable alternatives for accomplishing a number of strategic objectives in the context of building and realizing value for the investors and owners of emerging-growth and middle market companies (those from start-up to about $500 million in revenue), for corporate acquirers and corporate development teams, and for private equity investors.

This chapter takes a high-level view of financing transactions and presents a framework for thinking about the various alternatives, and then provides a financing primer and overview of various funding sources and types.

PERSPECTIVE

In many instances the distinction between selling a company (i.e., an exit) and raising capital is measured by the amount of equity sold and the contractual rights obtained by the buyer or investor. Financing growth and acquisitions raises the issue of long-term shareholder objectives, which most of the time involves eventual liquidity.

As the wave of business transitions driven by Baby Boomers planning their legacy and succession continues, some shareholders are confronted with a multifaceted decision of how to finance the continued growth of their business, create liquidity for their owners, and lay the foundation for operations independent of the owner/founder.

Others see the opportunity to buy out partners or ...

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