Banks are often in the position of curbing growth if only because they generally do not price their loans to account for the risks associated with change. Particularly where the company will require both additional senior debt from the institution in question as well as junior capital which will complicate the company's balance sheet and introduce a new party into the lending relationship, the bank may elect to exit the loan. The most important insight an entrepreneur can take into a refinancing situation is the fact that the same amount of senior debt can look very different depending on the other elements of the balance sheet, even without any changes in the company's base business. The opportunity to complete a strategic acquisition is one of the best ways to enhance the value of a company, since an acquisition may enable you to leap frog competitors, open new markets, develop new product lines, etc. However, a poorly executed acquisition can weaken a company's balance sheet and distract key management without providing the anticipated value.
All acquisitions have unique characteristics and, therefore, unique financing requirements.
We have highlighted below the three basic types of financing and their respective pros and cons. The amount of debt which should be raised. Creating a capital structure that is appropriate for the combined Company's future. The cost of funds. Debt Financing Debt is the cheapest method of financing an acquisition bid and can take many forms.