What interest rate should I expect from PE?

by a searcher from University of South Alabama

3 years ago

I am getting closer to a potential acquisition but am considering securing PE funds for equity injection.  I realize there are many variables when determining interest rate but this is a manufacturing company founded 35 years ago with margins just over 40%.  Around $1M in annual revenue.  Any additional info you all would need to give me a better idea of rate I could expect from PE firm? 

Additionally, is it typical (or accepted) by lenders to have a debt structure with a Sellers Note, PE funds, and the bank's funds? I realize bank will be paid first. 

Thanks in advance,

Wilson

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5 comments

searcher from University of Texas at Austin

Q1: If your are looking for equity, see Hiram's comment above. 40 years and only $1MM in Revenues? I would think very few PE funds would be able to participate in this size transaction. If you are looking for debt, the rate will depend a lot on collateral and how the business is doing. Rates can vary from low mid teens to mid twenties. Q2: Yes, sellers note is usually subordiante to everybody else.

3 years ago | like reply | 0 likes

searcher from University of California, Berkeley - Haas School of Business

On capital structure part of your question. There is a layer for each type of capital you mentioned. Not always but they could co-exist. pm me if I can help.

3 years ago | like reply | 0 likes

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