Definition
Acquisition financing is a method of funding an acquisition. It can be used for companies that are not funded by their parent company or external investors.
In the room
How the word shows up in a real conversation.
Jane is a successful entrepreneur who recently founded her own software company. She believes that software development can greatly increase the company's market share. Jane has been looking for ways to expand and grow the company over the last few years, but not all at once.
One day, she learns about a small software company that has developed a unique technology that could complement her own company's products.
After conducting due diligence, Jane decides to pursue the acquisition but realizes that she does not have enough cash on hand for the acquisition. This is where financing comes in and it's called an acquisition financing loan.
Jane has been looking for a bank to help her acquire some financing for her business for weeks. Long negotiations finally yield fruitful results when one of the banks she talked to offers to provide her with a loan. Jane agrees to a partnership with the investment bank, in exchange for financing.
After the company acquired and Jane did too, they were able to expand their customer base and increase revenue. The new technology can bring more success as well.
Jane acquired financing to help her grow her business. This allowed her to avoid diluting her own ownership in the company.
In this scenario, by investing in a good loan from an investment bank, Jane was able to launch her business and complete the acquisition. Without this financing, it would have been nearly impossible for her company to seize their goals.
Common mistake
Using Acquisition financing as a label instead of a fact. If you cannot point to the evidence — a number, a customer, or a written assumption — you are using the word as jargon.
See also
Acquisition
The process of one company purchasing another company to expand business operations.
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Acquisition integration plan
Strategic roadmap for merging two companies after a successful acquisition deal.
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Acquisition strategy
Long-term plan for identifying, evaluating, and acquiring target companies.
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Acquisition target
A company that is being considered for purchase or merger by another organization.
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