Question About Proof of Fund for Brokers

by a searcher from Columbia University - Columbia Business School

4 years ago

I'm a self-funded searcher and I have a deal where I have made it to the last round of bidding. The broker agrees that my offer amount is in line with others and there's good chemistry between me and the seller. 

However, they mention that my ability to raise the funding needed is of concern as there are other parties that have the liquid cash on their balance sheets to buy the company. I have already provided support letter from equity investors in combination with a soft commitment from a bank. Collectively this exceeds my offer price but it doesn't seem to satisfy the broker. 

I obviously don't have the liquid cash on my balance sheet and can't compete on that. Any suggestions on what else I can do to alleviate their concern? Thanks.

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searcher from New York University - Leonard N. Stern School of Business

How detailed were your support letters from equity investors? Did they confirm that the equity investors were interested in $x dollars of investment in a single transaction of this nature and that they had ready access to such funds? If so, I fully understand the frustration. Also, what size deal is this? I have noticed that when the deals get above the $2mm SDE mark, the brokers tend to require more detailed proof of funds.

3 years ago | like reply | 0 likes

intermediary from Vanderbilt University

If the seller is willing/interested in a seller's note, perhaps that may be a way to solve the problem. Many sellers today like the idea of getting a fixed return that far outpaces returns that they could get elsewhere. Maybe a reasonable time frame for the seller - like a 3 to 5 year note - at an interest rate in the 5%+ range. Just another way to possibly structure the deal.

3 years ago | like reply | 0 likes

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