A guide to key resources: acquisition finance

Practical Law UK Practice Note Overview 3-502-8177 (Approx. 13 pages)

A guide to key resources: acquisition finance

by Practical Law Finance

Scope of this note

This note acts as a guide to our resources on acquisition finance. Acquisition finance covers a broad range of financing structures where an existing company or special purpose vehicle (SPV) purchases all, or some of, the assets or shares of a public or private target company. Examples of deals involving acquisition finance include leveraged buyouts and corporate acquisitions (that is, debt-financed acquisitions made by trade buyers rather than management or a private equity firm).

Acquisition finance: overview

For an overview of the debt finance aspects of a buyout, covering the different types of debt, security, priority issues and the typical terms of the senior debt and mezzanine debt documentation, see Practice note, Acquisition finance: debt for buyouts.
For a multi-jurisdictional guide to acquisition finance, see Acquisition Finance Global Guide.

Acquisition finance: structure and ranking of finance

Main funding sources for acquisitions

For a note considering the commercial factors that influence the buyer's choice of finance for an acquisition of a business and analysing the most common forms of debt and equity finance, see Practice note, Acquisition finance: funding sources for acquisitions.

Loans

For a guide to our lending resources, see Practice note, A guide to key resources: general lending.

Debt securities

For a guide to our debt capital markets resources, see Practice note, A guide to key resources: debt capital markets.

Senior debt

For an overview of senior debt for a buyout, see Practice note, Acquisition finance: debt for buyouts: Senior debt.
For an overview of "covenant-lite" (also known as "cov-lite") loan facilities, see Practice note, Covenant-lite facilities: overview.

Second lien debt

For a note explaining what second lien financing is, how it developed and how it can be distinguished from senior debt and other forms of subordinated debt, see Practice note, Second lien financing: overview.

Mezzanine debt

For more information on mezzanine debt, see Practice notes:

Unitranche debt

For a note about unitranche loans, describing their key characteristics and advantages for borrowers, see Practice note, Unitranche financing.

High yield debt

For a note on raising debt finance by issuing high yield bonds, including an explanation of key structuring issues and typical high yield bond covenants, see Practice note, High yield bonds.

PIK debt

For an overview of PIK debt, see Practice note, Acquisition finance: debt for buyouts: PIK debt.

Equity

For an overview of raising equity finance, see Practice note, Acquisition finance: funding sources for acquisitions: Methods of raising equity finance.
For a note outlining the key characteristics of equity bridge facilities provided to private equity funds, see Practice note, Equity bridge facilities to private equity funds.
For information on the use of equity finance for a buyout, see Practice note, Private equity buyouts: overview: Equity finance.

Subordination and intercreditor arrangements and security documents

Subordination

For a note explaining structural and contractual subordination in the context of acquisitions, see Consideration and Acquisition Finance Toolkit (International): Ranking Debt.
For an overview of subordination arrangements generally, see Practice note, Subordination.

Intercreditor arrangements

For an overview of intercreditor arrangements in the context of acquisition finance, see Practice notes:

Security

For an overview of the typical security structure and security documentation for a buyout, see Practice note, Acquisition finance: debt for buyouts: Security documentation.
For a guide to our resources on security, see Practice note, A guide to key resources: security and quasi-security.

Reviewing other transaction documents

For information on key issues for a lender and its legal advisers to consider when reviewing:

The suite of acquisition documents in the context of financing the acquisition of shares in a private company incorporated in England or Wales (or a business or assets), see Practice note, Reviewing acquisition documents: issues for lenders and Checklist, Acquisition financier concerns in acquisition documents.
The equity documents in the context of financing the acquisition of shares in a private company incorporated in England or Wales (or a business or assets), see Practice note, Reviewing equity documents: issues for lenders and Checklist, Acquisition financier concerns in equity documents.

Financing an offer for a public company

General

For a note providing an overview of issues for lenders financing an acquisition that must comply with the City Code on Takeovers and Mergers, see Practice note, Financing an offer for a public company: issues for lenders.

Certain funds requirement

For a note about the "certain funds" requirement set out in the City Code on Takeovers and Mergers, see Practice note, Financing an offer for a public company: the certain funds requirement.

Financial assistance

For a note considering the rules under the Companies Act 2006 that prohibit a public company from giving financial assistance, see Practice note, Financial assistance.
For a summary of how the financial assistance rules apply to buyouts, see Practice note, Financial assistance in buyouts.

Distressed debt trading and debt buy-backs in acquisition finance

Debt buy-backs can occur in an acquisition finance context. As a result of the financial crisis in 2008 following the collapse of Lehman Brothers, for example, certain private equity providers started buying back debt in companies they owned. For a guide to our distressed debt trading and debt buy-back resources, see Practice note, A guide to key resources: general lending: Distressed debt trading and debt buy-backs.

Tax

Lending: tax

For a guide to our tax resources on lending, see Practice note, A guide to key resources: general lending: Tax.

Asset purchases: tax

For a note on the tax issues for the buyer to consider when financing an acquisition of assets, see Practice note, Asset purchases: tax aspects of financing the acquisition.

Share purchases: tax

For a note outlining the major tax issues that arise when structuring the sale of a company's share capital (the note assumes that the target company is resident and incorporated in the UK and deals mainly with the position of UK resident shareholders), see Practice note, Share purchases: tax overview.

Earn-outs: tax

For a note on the tax issues relating to earn-outs, see Practice note, Earn-outs: tax overview.

Private equity: tax

For a note providing an overview of the main tax issues that arise in private equity transactions (including the taxation of private equity funds and executives), see Practice note, Private equity: tax overview.

Legal opinions in acquisition finance transactions

For links to Practical Law materials on legal opinions issued in connection with loan agreements, see Legal opinions in lending transactions toolkit.

Execution of acquisition finance documents

For a guide to our resources on executing finance documents, see Practice note, A guide to key resources: general lending: Execution of loan documents.

Key standard documents, clauses and drafting notes

For a guide to our standard documents, clauses and drafting notes for lending, see Practice note, A guide to key resources: general lending: Key lending standard documents, clauses and drafting notes.

International acquisitions

For an overview of the main issues to consider when structuring consideration and finance (debt and/or equity or a combination of the two) for a cross-border acquisition, see Consideration and Acquisition Finance Toolkit (International).
For a practical analysis of the mechanics of signing and closing and key provisions of opinion letters in cross-border acquisitions, see Signing, Closing, and Opinions Toolkit (International). Although the note focuses on cross-border acquisitions many of the topics covered are relevant to the financing aspects of this type of transaction.

Links to Practical Law's resources on acquisition finance and related Practical Law services

Practical Law Finance resources on acquisition finance

Links to our resources on acquisition finance can be found on the Acquisition finance topic page.

Related Practical Law resources

Links to other Practical Law services covering key practice areas relevant to acquisition finance:

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A guide to key resources: acquisition finance | Practical Law