Acquisition Financing Agreement

Acquisition Financing Agreement

An Acquisition Financing Agreement is a legal contract outlining the terms under which a buyer secures funding to purchase a business, asset, or property. This agreement is typically used in mergers and acquisitions, where a company seeks to finance the purchase of another company or its assets.

The Acquisition Financing Agreement details the sources of financing, such as loans, equity investments, or a combination of both. It specifies the amount of capital required, the interest rates, repayment schedules, and any covenants or conditions that must be met by the borrower. These agreements often include provisions for due diligence, closing conditions, and rights of the lenders or investors.

For instance, if a company aims to acquire a competitor valued at $5 million, it might enter into an Acquisition Financing Agreement with a bank to secure a $3 million loan, while also raising $2 million through private equity investors. The agreement would stipulate the terms of these financial commitments, ensuring that both the lender and the equity investors are protected and informed throughout the acquisition process.