How to handle Brokers/Sellers trying to confirm committed capital?

by a searcher from Harvard University - Harvard Business School

1 year ago

Need advice on how to address questions from brokers/Sellers trying to confirm that I have committed capital, before sharing more details on the acquisition target. I'm taking the Self-funded route and don't have formal investor commitments yet.  Here's an email I received from a broker after I signed an NDA for a listing: "The seller wants to know that buyers looking at the materials have access to committed capital so they can finance the acquisition up front. Can you provide more details on your financing arrangements?"  

Is this common? How do you respond without de-motivating the Seller from talking to a Searcher?

2 likes
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36 comments

intermediary from Yale University - School of Management

In my humble opinion, try to be as direct and straight forward as possible. If a broker of investment banker asks this question, it's because the seller wants to guage certainty of closing. If an ibanker feels like you are fudging the answer, you lose credibility. If you dismiss and "move on" without a reply, it will be interpreted as hiding. If you want to represent yourself well and the entire search fund community, be straightforward and serious. I might say...I understand you want to guage my probability of closing. That is normal in the capital markets. I have $ 2,XXX,XXX in financing from the SBA which is easily confirmed with 1.5 ~ 2X EBITDA, with due diligence, I have $ XXX,XXX dollars committed personally, I have circled $ 5,XXX,XXX of capital waiting on the sidelines. I would even suggest practice this statement, so that you are prepared for anyone asking the question.

2 months ago | like reply | 0 likes

professional from Queen's University

Consider asking LPs for a generic Letter of Support

5 months ago | like reply | 1 like

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