Acquisition Finance Sources: Debt, Equity and Seller Financing

Summary

This practice note discusses the various sources of financing an acquisition by debt, as well as issues related to financing an acquisition with equity and seller financing. These sources are as varied as the structure and motivations for the acquisitions themselves. The most efficient source depends on several factors, including the cost of raising capital, prevailing interest rates, flexibility desired and any anticipated need for future financing. Potential sources of financing generally can be divided into equity financing and debt financing. Seller financing, defined as financing provided by the seller or sellers of the business being acquired – either structured as debt or equity – raises special issues.