Debt structure including WC finance

February 05, 2025

by a searcher in Barcelona, Spain

Has anyone used WC finance as a debt structure upon acquisition? I am trying to finance my deal the following way:
- Investors equity: 6M
- Vendor loan: 2M payable in 5 years
- Senior bank debt: 1M
- Short term debt/Working Capital finance: 1M - the company has a postive €2.5M working capital

Has anyone faced this? How have banks reacted?
I am searching in Spain, so would love to hear from Spanish searchers

Reply by a searcher
from Universität Mannheim in Munich, Germany

As Anthony said, couldn't you finance the WC as part of the bank loan? You could increase the senior bank debt to 2 M and use 1M from the investors equity as a WC injection to the business. Just give the investors the same conditions as if their equity were 6M (Step Up, etc). You need 10 M in total, 9 for the owner and 1 for the WC. 5M Investors + 2M Vendor + 2M bank debt + 1M WC from the investors.

Reply by a professional
from American University in Irvine, CA, USA

Hi. We have worked on many transactions where WC, and other cash and equivalents, are part of the leveraged assets. The banking syndicates we have worked within the past have included Spanish banks, so i suspect that they would permit the same LBO structures for domestic transactions. Feel free to DM me if you would like to talk.

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