Acquisition finance for the lower-mid-market
Most private-debt deals fund an acquisition, not a refinancing. For a £1–8m EBITDA company making its first bolt-on, the structuring choices made at the outset shape the next three years of headroom.
- Dated
- 18 July 2024
- Desk note
- Dated to the data
- Reading
- 8 min
Managing Director
Roughly two-thirds of European private-debt deals fund an acquisition, not a refinancing: about 67% on Deloitte’s latest tracker, and it has sat in that band for four years. For a £1–8m EBITDA company making its first bolt-on, that means acquisition finance is a standard product, not a bespoke event. The borrower who treats it as standard, arranging a committed acquisition line and headroom up front, buys a runway. The one who finances deal-by-deal re-opens his terms every round and pays for it.
It is easy to assume, from the inside of a first deal, that buying a company with debt is an exotic thing the lender will treat as such. The market data says the opposite. Funding acquisitions is what the private-debt market mostly does. On Deloitte’s deal tracker, the share of activity revolving around an acquisition, rather than a pure refinancing or recapitalisation, has held around two-thirds across every edition for four years, dipping no lower than the low sixties even through the 2022–23 rate shock.
Across four years of editions, roughly two-thirds of private-debt deals funded an acquisition; it was never the minority.
| Edition | Acquisition-funding (%) |
|---|---|
| Spr ’20 | 64% |
| Aut ’20 | 67% |
| Spr ’21 | 71% |
| Aut ’21 | 71% |
| Spr ’22 | 65% |
| Aut ’22 | 64% |
| Aut ’23 | 70% |
| Spr ’24 | 67% |
- Deals funding an acquisition
Share of European private-debt deal activity funding an acquisition (the Tracker's 'deal purpose' metric: buyout in the earlier editions, acquisition in the later ones), by edition. Every figure is a Deloitte-published headline from an edition public by July 2024; the most recent is the Spring 2024 PDDT (data to H2 2023, 67%). Counts are retrospectively revised as survey participants change, so we label by edition, not by an absolute deal count.
Source · Deloitte Alternative Lender / Private Debt Deal Tracker, Spring 2020 to Spring 2024 editions
The practical reading of that chart is reassuring and slightly liberating. You are not asking a lender to do something unusual. The whole apparatus of unitranche facilities, leverage multiples and covenant packages exists, first and foremost, to fund deals. The structuring questions therefore have standard answers, and a first-time buyer is entitled to expect them rather than negotiate each one from scratch.
≈67%
Share of European private-debt deal activity funding an acquisition on the Spring 2024 tracker (data to H2 2023). Of all activity, about 33% were leveraged buyouts; roughly half the acquisition share was bolt-on add-ons rather than platform deals.
Source · Deloitte Private Debt Deal Tracker, Spring 2024
Is acquisition finance really the standard case, not the exception?
Yes, and the stability of the mix is the part that should change how you prepare. Acquisition lending does not spike in good years and vanish in bad ones; it is the steady, dominant purpose of the market regardless of the cycle. Split the deal purpose into acquisition-funding versus everything else, edition by edition, and the acquisition band barely moves off two-thirds.
Acquisition is the standing purpose of the market, not a cyclical spike: about two-thirds in every edition.
| Year | Refinancing & other purposes | Acquisition-funding |
|---|---|---|
| Spr ’21 | 29% | 71% |
| Spr ’22 | 35% | 65% |
| Aut ’23 | 30.5% | 69.5% |
| Spr ’24 | 33% | 67% |
- Acquisition-funding
- Refinancing & other purposes
Deal purpose framed as a 100% split: acquisition-funding versus refinancing and other purposes. The acquisition share is the Deloitte-published figure for each edition; the refinancing/other band is its complement to 100%. Plotted at the approximate data-period mid-point of four editions, all public by July 2024. Within the acquisition band, the Spring 2024 edition reports that 2023 leveraged buyouts were about 33% of all activity; roughly half of the acquisition share was bolt-on add-ons rather than platform buyouts.
Source · Deloitte Alternative Lender / Private Debt Deal Tracker, Spring 2021 to Spring 2024 editions
That stability matters because it tells you the playbook is repeatable. Within the acquisition share, the Spring 2024 edition put leveraged buyouts at about a third of all deal activity in 2023. A large portion of the rest was therefore bolt-on add-ons by companies that already had a platform and a facility, buying again. That is the buy-and-build path a lower-mid-market owner is on after the first deal, and the lenders see a great many of them. The structures are well-worn; the mistake is to approach each round as if it were the first.
What should a first-time buyer fix at the outset?
Two things, and both are about the second deal, not the first. The first is a committed acquisition line: pre-agreed headroom to fund future bolt-ons on terms set today, while the lender is competing hardest for the relationship. The second is accordion capacity: an agreed mechanism to increase the facility up to a stated ceiling without re-papering the whole deal. Neither is exotic; both are standard features of a well-arranged lower-mid-market facility, and neither is volunteered to a borrower who does not ask.
Arrange the second deal’s headroom in the first deal’s documents. That is the difference between a buy-and-build runway and a sequence of cold-start negotiations.
The borrower who finances each acquisition in isolation pays a quiet tax every round: a fresh credit process, fresh diligence fees, a fresh negotiation on leverage and covenants, and, worst of all, a timetable the seller can see. The borrower who fixed the acquisition line and the accordion at the outset draws down against pre-agreed terms and competes on speed. In an auction for a bolt-on, certainty of funds arranged in advance frequently decides whether you win the asset or explain to the board why it went elsewhere.
The acquisition-share series is Deloitte’s own deal-purpose metric, taken edition by edition; the refinancing-and-other band is its complement to 100%. The split between platform buyouts and bolt-on add-ons within the acquisition share is reported only for 2023, when leveraged buyouts were roughly 33% of all activity.
What it means for a £3–15m facility
The argument reduces to a sequencing point. Acquisition finance is the market’s standing business, the structures are standard, and the leverage you have over their terms is highest before the first deal closes, when several lenders are competing for a new relationship. Spend that leverage on the things that compound: a committed acquisition line, an accordion with a sensible ceiling, and a covenant package built around the combined entity’s cash flows with real headroom. Do it once, run it as a competitive process across banks and direct lenders, and the next three years of bolt-ons draw on a runway you already own rather than a negotiation you reopen every time a target appears.
Questions a CFO asks
Common questions
- What is an acquisition line or accordion, and why arrange one before I need it?
- An acquisition line (or a committed accordion) is pre-agreed headroom to draw further debt for future bolt-ons, on terms fixed at the original deal. The point of arranging it up front is leverage: you negotiate the margin, the leverage ceiling and the conditions once, while the lender is competing for the relationship, rather than re-opening the whole credit every time a target appears. Buyers who finance deal-by-deal pay for that omission in time and terms at exactly the moment they can least afford a slow process.
- How much can a £1–8m EBITDA company borrow to fund an acquisition?
- It depends on the combined, post-deal cash flows rather than a headline multiple, but for a clean lower-mid-market credit, senior debt is typically structured against pro-forma EBITDA and sized to leave a real margin of headroom against the covenants, not the maximum the model will bear. The facility size that matters is the one that still services comfortably if the synergies arrive late; arranging against a sensible case, not the optimistic one, is what keeps the next bolt-on financeable.
- Should I use my relationship bank or a private-debt fund for acquisition finance?
- Neither by default. The answer comes from putting both in the same process. A clearing bank often prices a clean acquisition keenly; a direct-lending fund will frequently stretch further on leverage, commit an acquisition line and move on a tighter timetable. Since roughly two-thirds of the private-debt market exists to fund deals like yours, the cost of approaching only one lender is the structure you never saw because you never asked for it.