O&MM Fabricator - March/April 2017 - 36
F inan c
MARK E. BATTERSBY
ncouraged by many factors mergers and acquisitions (M&A) appear to be on the upswing, with
most of the recent action involving smaller deals.
Obviously, not everyone is in a position to buy,
but for the owners and managers of many small
ornamental and miscellaneous metal fabricating
businesses, acquisitions or mergers are a way of
cutting overhead costs, increasing efficiency or
battling a larger competitor.
There are a number of key factors that should
be considered when pursuing an acquisition, such
as the continued growth opportunity provided
by the target business, its purchase price and, of
course, financing. Securing capital and the best
financing terms for an acquisition can be daunting,
challenging - and expensive.
Outside the Box
Fortunately, there are numerous funding
sources that can provide capital for the acquisition
36 | March/April 2017 * O&MM Fabricator
of an established business. In fact, largely because
of the recent credit crunch a lot of alternative
financing sources have surfaced. However, while
private lenders are coming to the forefront, the
cost of capital is often higher than a traditional
A key to the type and availability of funding is the
structure of the business that is being acquired.
A business with little debt, significant assets,
and strong cash flow is a good candidate for an
acquisition - with a significant portion of longterm debt financing usually available.
Paying for it All
Today, buyers are seeing acquisitions that are
20 percent self-financed, seller financed by around
30 percent and bank financing at, or even less than,
50 percent for the balance of the purchase price.
Among the financing strategies that a metalworking business can use to finance an acquisition are: