Public Commentary: The information below outlines FG Capital Advisors’ approach to bridge-finance facilities for mergers and acquisitions. It is provided for informational purposes only and does not constitute investment advice or a solicitation.
Bridge Financing for M&A Transactions – Rapid Liquidity for Acquisitions
Competitive auction timetables and regulatory approvals often compress closing windows. When permanent capital—bond issuance, term loan B, or equity fundraising—cannot be finalised by the drop-dead date, bridge financing provides the short-term liquidity necessary to consummate the deal. Structured correctly, the facility preserves negotiating leverage, protects equity dilution, and dovetails seamlessly into take-out refinancing.
Bridge-Facility Snapshot
| Parameter | Typical Range |
|---|---|
| Ticket Size | US$20 million – US$250 million |
| Tenor | 6 – 18 months (single-draw or delayed-draw) |
| Pricing | SOFR + 500 – 750 bps; OID 1.0 – 2.5 % |
| Security Package | First-lien pledge over acquisition vehicle shares and target assets |
| Covenants | Max LTV ≤ 70 %, minimum liquidity, mandatory take-out deadline |
| Permitted Take-Out | High-yield bonds, term loan B, asset-based revolver, or equity raise |
Sources of Bridge Capital
• Specialty Direct-Lending Funds
– Rapid underwriting; flexible covenant structures.
• Credit-Focused Hedge Funds
– Appetite for short-dated, high-yield paper with equity-kicker potential.
• Insurance-Backed Private Credit
– Competitive pricing for investment-grade sponsors.
• Bank-Led Underwritten Bridges
– Best-efforts syndication; commitment fees offset by future term-loan placement mandates.
Common Use-Cases
| Scenario | Why a Bridge? | Exit Strategy |
|---|---|---|
| Private-equity bolt-on under exclusivity clock | Avoids equity call; secures asset before competitor bid | Refinance with incremental TLB at next syndication window |
| Corporate carve-out with delayed bond-market access | Keeps closing timetable intact despite volatile spreads | High-yield issuance once market reopens |
| Regulatory-approval gap for asset-sale proceeds | Unlocks cash to close acquisition while waiting for divestiture cash-in | Mandatory prepayment from sale proceeds |
Execution Timeline – From Mandate to Closing
Day 0–5 | Mandate & Term-Sheet Agreement
– Commercial terms locked; due-diligence checklists issued.
Day 6–20 | Diligence & Documentation
– Financial model validation, legal review, collateral walk-through.
Day 21–30 | Credit Approval & CP Satisfaction
– Lender IC approval, deliverables received (QoE, legal opinions).
Day 31–40 | Funding
– Security perfection, funds flow, and acquisition closing.
Key Success Factors
- Clear Take-Out Path: Documented refinancing plan with back-up options.
- Robust Collateral Valuation: Independent appraisal supporting advance rate.
- Integrated Legal Counsel: Concurrent negotiation of acquisition SPA and bridge-loan agreement prevents timetable slippage.
- Stakeholder Alignment: Equity sponsors, senior management, and lenders agree on exit timeline and covenants.
Engagement
Sponsors preparing to acquire assets but facing a short closing window are invited to consult our advisory team. We welcome the opportunity to discuss eligibility, indicative pricing, and execution milestones for bridge-finance solutions tailored to your transaction.
This document is provided solely for informational purposes. It does not constitute investment advice and should not be interpreted as an offer to buy or sell any security, financial instrument, or service. Independent professional guidance is advised before acting on any information contained herein.
