Acquisition Financing in M&A Transactions: Reconciling Deal Terms With Loan Terms and Closing Conditions

Description

An M&A transaction often hinges on satisfying the demands of a lender financing all or part of the purchase price. The buyer and seller must avoid a scenario where the conditions precedent to the buyer’s obligation to close the acquisition have been met but the conditions to the lenders funding the loan have not. The loan commitment must clearly state the financing conditions and provide that there are no other conditions to closing.

Lenders regularly require inclusion of certain provisions in acquisition agreements. The structure of the acquisition dictates factors for financing, including collateral perfection, identity of the guarantors and borrowers, and timing of the acquisition. In deals with complex lending structures, the parties may choose to use a specified form of intercreditor agreement.

M&A lenders will require the representations with respect to the seller be accurate at closing. Lenders will also consider the indemnities provided by the seller in the acquisition agreement. Acquisition agreements typically contain anti-assignment and transfer provisions—the lender may want those provisions to expressly permit the lender to take a lien on the acquisition agreement.

Listen as our authoritative panel discusses how M&A financing terms can impact acquisition terms and how M&A deal structures can affect financing terms. The panel will also discuss loan commitments and how to ensure that loan closing conditions are consistent with the acquisition closing.