Independent Sponsors: How do you demonstrate financial backing to sellers?

by a searcher

4 years ago

I am curious how independent sponsors navigate when a potential seller asks for them to produce statements or demonstrate financial backing before proceeding to even have a discussion.  This seems like a big roadblock.

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4 comments

searcher from Texas A&M University

If it is a good deal, then the investors will come. As far as needing assurances, I would just tell them that you have a group of investors interested in backing an acquisition of 1) a good business with 2) good people with 3) good cash flow. If the business has those things then there should be nothing to worry about.

4 years ago | like reply | 0 likes

searcher from New York University - Leonard N. Stern School of Business

I assume that the goal is to begin a discussion and not necessarily to close right away. The first thing I would do is make sure that you have a current personal financial statement. You don't need to share this with the seller, but it is a good basis for what you will want to share. And if you are going to use a bank for an acquisition you will need to provide this to obtain a loan. Note that the bank is likely to expect to receive an updated PFS annually.

Once you have the PFS, you can take the information from the asset side and create a nicely formatted table showing your some or all of assets. This will hopefully show that you have access to cash and are taking this seriously.

4 years ago | like reply | 0 likes

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