Private Equity investor For Acquisition

May 17, 2025

by a professional from University of Georgia in Los Angeles, CA, USA

Most lenders for acquisitions require us to have something in the deal besides their debt. Does anyone know of a PE firm that will invest this portion of the financing if the lender is secured contingent on that equity piece?

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Reply by a searcher
from Parsons School of Design in Cuxhaven, Germany

Gene, many of my consulting clients and partners face similar challenges when it comes to structuring creative financing and overcoming growth obstacles. I understand how these issues are very common Below are a few effective solutions. To address the challenge of securing acquisition financing without relying on private equity (PE) firms, creative strategies like owner financing and equipment sale-leasebacks can provide the equity-like component lenders often require. Here’s a structured approach: 1. Seller Financing (Owner Financing) This strategy involves negotiating with the seller to fund a portion of the acquisition, reducing the need for external equity. Key applications include: • Subordinate Seller Note: The seller provides a loan for 10–30% of the purchase price, subordinate to the bank’s senior debt. This satisfies the lender’s equity requirement while allowing the seller to earn interest. • Forgivable Note: A portion of the seller’s financing is structured to forgive over time if performance milestones are met, bridging valuation gaps. • Installment Payments: Defer part of the purchase price with fixed payments tied to cash flow, reducing upfront capital needs. Bank Appeal: Lenders often view seller financing as "skin in the game," aligning seller and buyer interests. It also mitigates default risk by spreading repayment obligations. 2. Equipment Sale-Leaseback Leverage owned assets to generate liquidity: • Sell critical equipment to a lessor and lease it back, converting fixed assets into working capital. This strengthens the balance sheet and provides cash for the acquisition. • Use proceeds to fund the equity portion required by the lender, avoiding dilution from PE investors. Bank Appeal: Improves liquidity ratios and demonstrates asset-backed security, making the debt structure more attractive to lenders. 3. Hybrid Structure Combine strategies to maximize flexibility: • Use a seller note for 15–20% of the purchase price. • Execute a sale-leaseback on non-core assets (e.g., real estate, machinery) to fund another 10–15%. • Pair with a bank loan for the remainder. Example: For a $10M acquisition: • $6M senior bank debt (60%) • $2M seller note (20%) • $2M sale-leaseback proceeds (20%) Key Advantages Over PE Financing • No Equity Dilution: Retain full ownership by avoiding PE stake sales. • Faster Execution: Bypass lengthy PE due diligence and negotiations. • Custom Terms: Negotiate interest rates, repayment schedules, and collateral directly with sellers/lessors. Risks to Mitigate: • Ensure leaseback terms align with cash flow projections. • Structure seller notes with reasonable interest rates to avoid balloon payments. By integrating these methods, lenders gain confidence through layered security and reduced leverage, while the buyer preserves control and avoids PE dependencies. I’d love to connect (Linkedin or FB Msgr) and explore how my consulting services could help you achieve your business goals. If you’re interested in discussing opportunities or creative strategies for growth, let’s set up a quick call. _ Join 👉🏻 https://www.linkedin.com/newsletters/fund2flourish-7264000664869953536/ Monthly newsletter: insights, case studies, and entrepreneur stories in the trenches. Connect 👉🏻 https://www.facebook.com/kennethlbreeze Discover 👉🏻 https://www.facebook.com/BreezeBusinessConsulting

Reply by a searcher
from The University of Chicago in Chicago, IL, USA

Thanks Luke. Hello Gene, to make sure i understand correctly, are you looking for equity financing for a search deal?

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