Most recently, I had an opportunity to arrange funding to accomplish large acquisition. There were two major challenges that were moving concurrently was to negotiate the deal and in parallel negotiate the funding. Every move was very challenging and was full of permutations and combinations. Every decision that was taken had lot of “Ifs and Buts” Sometime it appeared that we are moving one step ahead and two steps backward. We were loosing directions dealing with risk, emotions, ego and opportunity.
Post signing of the MoU, with the target the most important challenge that was on the table was to arrange the funding, simultaneously with various due diligence and holding up the relationship with Sellers.
We explored various routes such as equity funding, mezzanine funding, funding from India and funding from UK.
We analysed the pros and cons. Cost, time and quantum was the deciding factors. There were regulatory challenges as well. We being a company having multi country setup, the regulatory requirements of various countries also had to be dealt with.
During the course of the fund raising we had the opportunity of meeting with various fund houses, brokers, fund managers, financial consultants, tax advisors and so on. We also had to look into the corporate structuring and the entity that we should utilize to acquire the company. it was interesting to consider various options based on taxation and ease of operation. We received opinions from various advisors and the opinions were conflicting. We had to choose the best out of the best considering our current capabilities, management bandwidth and future aspirations. We had to make certain tough decision and also had to deal with some of the grey area. As a law abiding citizen we wanted to err on the conservative side of the law, and at the same time we had to make decision which was friendly to the deal.
Coming back on the topic of funding we started working on the theory of elimination, as which route should we follow. Equity has its own challenges and cost, aspirations of the investor is normally very high and there are lot more formalities and clarity of EXIT route. Mezzanine funding is very expensive but yes it can be quick. Ultimately our decision was tilting in favour of banks borrowings. Bank funding also has its own limitations and certainly does not make the business very scalable. It is a good option for acquiring companies if taken as a part of mix funding.
We started meeting various banks and prepared a business model that was bankable. We had several round of discussion, with more than a dozen bank. Every bank were looking at the dea with a different perspective. Different set of questions were asked by the bank and we had to respond to all of them very convincingly and honestly. About 2 months of detailed discussion, making us concerned and enthusiastic with every feedback that we were receiving. We did not lose our site and courage and it was heartening to see that out 12 targeted banks 6 agreed to meet our timelines and financial need.We had ample choice and we were enjoying the fruit of strategic thinking, hard work and continued focus. We were able to select the bank that was most friendly to the deal and the deal was closed.
What I am sharing above is only tip of the ice berg. It was a continuous efforts of 6 months to close a cross border transaction. At the end it the success that matter!