Acquisition credit / Acquisition loan

An acquisition loan is a loan for financing company takeovers and acquisitions.

Along the life path of successfully operating and growth-oriented enterprises, in addition to natural development, sooner or later the possibility of external growth may arise. The form of this is acquisition, i.e. the purchase of a share in another company or the complete takeover of the given company. 

An acquisition can be financed from several sources, one of which is credit. One of the credit objectives of the credit schemes offered to growing businesses is therefore the possibility of financing the acquisition. 

At the same time, the question is, when is it worth thinking about a company acquisition and under what conditions can external financing be obtained? Simply put: buying a company with a loan is financially rational if the return achieved by buying share deal significantly exceeds the debt service of the loan taken out to for financing the acquisition.

The bank financing the acquisition usually expects not only that the investing company is profitable, capital intensity and creditworthy, but also that the target company planned to be acquired is in some way synergistically connected to the activities and operations of the investing company. That is (again, simply put) the cooperation between the two companies should result in some predictable and calculable additional result. For example, more cost-effective production, lower marketing costs in proportion to sales, i.e. situations where it can be said that the result of two and two is not four, but even more, can mean such an additional result. 

The acquisition can take place through the purchase of an invested financial asset (for example, a business share unit, shares) or a capital raise. During the credit application, it is necessary to submit documents related to the purchase of the invested financial asset or the capital increase (for example, the signed contract).

Another important characteristic of the loans used for acquisition is the minimum required level of own funds -reliance, which is typically at least 25-30 percent. The resources necessary for the investment must therefore be partially provided by the investing company.