I have a question about funding an acquisition which is something new to me as an FC.
I would like some advice about funding an acquisition as the co I work for is keen to purchase another co @ c. £1M selling price. To give you some idea of the size of the acquiring co (purchaser), the cashflow of the acquiring co is c. £0.6M and growing, with c. £1M debtors, c. £2M inventory at any given time.
Types of funding suggested
On first learning of the intention to acquire, I had an informal chat with my employers bank customer relationship manager. What he advised is that in addition to an ID facility we have running, we could finance via inventory or finance via a cashflow based loan. The inventory and cashflow based funding methods are new to me, so I was wondering if some AW members may be able to explain these types of funding for me.
Are there any good alternatives to using the debt instruments mentioned above? Would it be difficult to find keen equity funders for non-controlling interests, given that the acquiring co has a highly credible management team and the acquisition target is very profitable?
Any thoughts would be very welcome.