Acquisition financing

You’ve found a business worth buying. Now you need to know what you can actually pay for it, and how you’ll fund it.

I help Alberta buyers structure and finance acquisitions, and I get involved before the letter of intent, not after.

Why timing matters more than buyers expect

Most buyers call an advisor once the LOI is signed. By then the price is set, the structure is set, and the exclusivity clock is running. If the financing doesn’t support the deal you’ve agreed to, you have two options: put in more equity, or walk.

Getting the financing view early does three things:

1. You know your real ceiling before you negotiate, not after
2. Your offer is more credible to the seller, because you can speak to how it’s funded
3. You structure the deal — share purchase vs. asset purchase, vendor takeback, earnout, working capital adjustment — with fundability built in

Sellers increasingly discount offers from buyers who can’t demonstrate financing. Showing up with a model and a lender conversation already underway is a competitive advantage.

How acquisitions get funded

A typical structure layers several sources:

• Buyer equity — lenders want to see meaningful skin in the game, and the required amount varies considerably by deal quality and lender
• Senior term debt — from a bank, ATB, or a credit union, secured against the target’s assets and cash flow
• BDC — will amortize longer than a bank and will lend against goodwill and intangibles, which matters enormously in service businesses with few hard assets
• Vendor takeback — the seller finances part of the price. Signals confidence to lenders, and often bridges a valuation gap
• Asset-based lending — where the target has strong receivables and inventory but choppy earnings
• Mezzanine and private credit — fills the gap between what senior debt will advance and what you can fund with equity
• The Canada Small Business Financing Program — up to $1.15 million per borrower through participating lenders; useful in smaller deals, with real restrictions on eligible uses

Goodwill is the hard part. In an asset-light services business, most of the purchase price is goodwill, and senior lenders lend against it reluctantly. That gap is where deals die, and it’s what structure has to solve.

What I do

• Financial model — a full three-statement model of the acquired business with the debt structure layered in, showing whether it services and where the covenants sit
• Deal structure — coordinated with your accountant and legal counsel on share vs. asset purchase, tax, and risk allocation
• Financing — build the credit package, approach the right lenders in parallel, negotiate terms
• Due diligence support — quality of earnings review, working capital analysis, identifying what actually changes post-close
• Post-close — most of what goes wrong in an acquisition goes wrong in the first year. I can stay on in a fractional CFO capacity through integration if that’s useful

I’ve been through this from the inside: I’ve run the acquisition of a competitor several times our size, raised the debt for it, and then done the integration work — consolidating systems, harmonizing accounting policy, and getting a clean audit on the combined entity.

What I’ll tell you honestly

Not every deal should get done. Part of what you’re paying for is someone with no commission riding on the outcome telling you when the numbers don’t work, when customer concentration makes the earnings fragile, or when the seller’s add-backs don’t survive scrutiny.

Frequently asked questions

How much equity do I need? It varies more than a rule of thumb can capture — quality of earnings, asset backing, industry, and lender appetite all move it. A vendor takeback can materially reduce what you need in cash. I can give you a realistic range for your specific deal on a first call.

Can I finance the whole purchase with debt? Realistically, no. Lenders want to see the buyer at risk. What I can do is minimize the equity requirement through structure — vendor financing, earnouts, and a properly layered debt stack.

How long does it take? From engagement to funding, generally three to six months, running alongside your LOI-to-close timeline rather than after it. A well-prepared file with clean target financials can move faster; complicated due diligence is usually what stretches it.

I’m buying the business I already manage. Does that help? Yes, considerably. Management buyouts are viewed favourably by lenders because operating risk is lower — you know the customers, the team, and the numbers. The challenge is usually that management has strong operating credibility and limited capital. That’s a structuring problem, and it’s solvable.

Does the target’s industry matter? Meaningfully. Equipment-heavy businesses in industrial services, construction, and manufacturing have collateral to lend against. Asset-light service and professional firms are harder and lean more on cash flow lending, BDC, and vendor takebacks.

When should I bring you in? Before the LOI, ideally. Once you’ve identified a target and seen preliminary financials is the right moment.

What does it cost? A work fee plus a success fee payable on close, priced to the size and complexity of the deal. Written proposal before you commit; first conversation free.

Related

See also debt financing advisory and shareholder buyout financing.

Talk to me

If you’re evaluating an acquisition, a first conversation costs nothing.

Book a 30-minute call · (780) 884-0171 · cpham@phectorcapital.com