Structuring Issues in Leveraged Acquisitions

Summary

This practice note discusses certain structuring issues in the context of acquisition financings, including collateral security issues, intercreditor issues, and bankruptcy issues. Acquisition financings raise concerns regarding the extent and perfection of collateral security for the borrowing, the scope of guarantees (and collateral security) from multiple members of an affiliated corporate group, and for deals involving multiple tranches of financing, intercreditor issues regarding lien and claim priority. In addition, leveraged acquisitions raise potential issues under fraudulent transfer law because the assets and income of the target company are used to support the acquisition debt. While these issues are not unique to acquisition financings (indeed, they apply to all types of debt financing), there are certain aspects that may be the subject of particular focus in an acquisition financing.