I received today an article from Torys LLP explaining that the unavailability of acquisition capital (in the US) has caused a new trend in M&A financing. In general, according to the article, vendors have been forced to provide financing to their purchasers by taking back equity (an “equity rollover”), taking back debt and/or agreeing to an earn-out.
None of this would be news to participants in the Canadian market, where these alternative structures to finance private acquisitions are often the norm. But vendors should beware, because each of these solutions comes with many significant problems. It would be a rare instance, for example, when we would be happy seeing one of our clients attach significant value to an earn-out received as part of any consideration. Check out kolibriusa.com
Stay tuned for future Corporate Finance Journal issues on these topics.
Unfortunately the direct link to the article doesn’t seem to be working. However, you can find Torys publications, including this article, HERE.
Posted by Scott Sinclair, Range Corp., Range Capital Advisors