CASE STUDY
Acquisition Financing
Independent Sponsor Secures Acquisition Financing
$5MM acquisition financing features compelling 3 years interest only key deal term
- Challenge
Our borrower was an Independent Sponsor seeking debt capital to fund the leveraged acquisition of their fourth portfolio company. The borrower faced several challenges to secure acquisition financing.
- A new industry target compared to all previous acquisitions
- High amount of key man risk related to the seller/founder as the business was achieving a breakthrough in customer growth
- Near minimum revenue and adjusted EBITDA metrics for many non-bank cash flow lenders
- Borrower required a non-recourse lending solution given the passive nature of the committed LP equity investors
- Cerebro Solution
While the borrower maintained a lender network through their previous and current private equity activities, they used Cerebro to run a data driven process across a wider and deeper lender pool to eliminate financing search and execution risks as well as leverage their time for diligence and investment related processes. Cerebro also helped the borrower secure 3 years of interest only financing and saved the borrower 5 percentage points on their interest rate compared to the next best option available to the company.
Winning Term Sheet
- $5MM Term Loan, Cash-Flow Based
- 3 years interest-only, 10% per annually thereafter
- 10% cash interest/ 2% PIK (5 percentage points lower than the next best offer)
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