Financing Advisory

When companies consider acquisitions, financing questions inevitably arise. This concerns, on the one hand, the required financial strength and, on the other, the selection of the ideal financing structure and the appropriate legal framework.

A well-thought-out financing structure is essential for the successful acquisition of a company. At Loy & Co, financing advice is seamlessly integrated into our M&A advisory focus. The synergies between these areas are evident, as acquisition financing should be closely linked to the company purchase process. It is essential to integrate acquisition financing into an overarching strategic financing concept. The goal is to ensure maximum flexibility and entrepreneurial scope for the buyer in both the short and long term. The recommended approach to acquisition financing depends heavily on the specific circumstances of the target company and the buyer.

There are basically two main approaches to acquisition financing:

1. Corporate Financing:

• The acquisition is financed directly through the buyer’s balance sheet.
• Both the cash flows of the target company and the buyer serve as the financing basis.
• Typically simpler financing through banks in a clear structure with two credit tranches: amortizing loans and an overdraft facility.

2. “True” Acquisition Financing:

• Financing is provided through an acquisition company (NewCo).
• Only the cash flow of the target company is used as the financing basis.
• Financing in multiple tranches is common, including equity, seller loans, and mezzanine capital.

Depending The more detailed and convincing the financial planning and expected cash flows of the buyer and/or the target company can be presented, the more effectively the financing structure can be optimized. Loy & Co has extensive experience in financial planning structuring and customized financing structuring. Naturally, the available collateral and the buyer’s equity commitment are also important.

When planning your company’s growth, Loy & Co offers a comprehensive review of your business and investment strategy. We conduct a detailed analysis of your current financing structure and precisely determine your financing needs. It is important to seize such opportunities to evaluate the company’s overall financing strategy and make adjustments or restructurings if necessary.

The focus of growth financing is particularly on supporting internal company growth. This includes investments in physical assets, structural expansions, and securing working capital. There are a variety of financing instruments that can be used in this context, from long-term loans and leases to asset-based financing. Of particular note is the potential of current assets not previously tied up by collateral agreements, which can open up significant additional financing opportunities.

Refinancing offers a unique opportunity to thoroughly review existing financing arrangements. All current financing arrangements should be considered. It is important to recognize that not all financing agreements can be easily modified or replaced without disadvantages. Our primary concern is to ensure timely follow-up financing while avoiding risks such as liquidity fluctuations or prepayment penalties. A neutral review of financing relationships that have often developed over years can be very insightful. Depending on the specific company situation, it may be advisable to develop a completely new financing strategy. This may involve initiating competition among financiers or terminating banking consortiums with disadvantageous contractual terms.

Our approach includes both a preliminary rating and key performance indicator analysis and a clear presentation of the potential impact of different financing structures on your company’s financial performance. We advise you on selecting the optimal financing models and partners and accompany you throughout the entire implementation process. Our extensive market expertise combined with our diverse industry knowledge enables us to identify tailor-made financing solutions for you – including alternative or innovative financing options – with the aim of reducing your financing costs in line with market conditions.

In crisis situations, decisive and swift action is essential. The priority is not immediately on the ideal financing structure, but rather on securing current liquidity and preparing for intensive discussions with all lenders. The goal is to maintain existing financing as much as possible while considering alternative financing options in order to remain operational even in unforeseen situations.

The first step in restructuring phases is a thorough analysis of the current situation and its underlying causes. Detailed liquidity management becomes essential in such times. If not already in place, we help implement ongoing liquidity planning that considers various scenarios. Our integrated planning model allows us to simulate contractual agreements with lenders, such as covenants, to avoid potential breaches and the resulting termination rights of the lenders. Transparent, well-founded communication with lenders is key to successful negotiations. Thanks to our extensive experience in banking, we can effectively support this process.

In times of crisis, it is common for banks to transfer responsibility for support to their restructuring departments. This is often accompanied by a significant tightening of financing conditions. Our goal is to return to regular support and reasonable financing conditions as quickly as possible. In some cases, it may be necessary to replace certain financing partners or to restructure and renegotiate the entire corporate financing.