Improving the Finance Structure for Two Regional Supermarket Acquisitions
In this case study
Scenario
A seasoned business group with more than 10 years of industry experience was acquiring two regional supermarket businesses with freehold going concern components.
The client had already received a lending offer through another channel, but the proposed funding amount was materially below what was required.
The client needed a stronger structure and a faster response due to settlement pressure.
The challenge
The main challenge was achieving a suitable funding level across both secured property value and the business/goodwill component. The client required:
- Higher leverage than the original structure offered
- Funding support for goodwill
- Consideration of regional location risk
- Recognition of the borrower's industry experience
- Timely execution within an approximately eight-week settlement timeframe
The first transaction also affected the second, as cash used for the first purchase reduced liquidity available for the second acquisition.
How Bridle Partners assisted
Bridle Partners reviewed the transaction and workshopped the structure with lending partners. The application was positioned around:
- The client's established industry experience
- The freehold going concern nature of the acquisitions
- The split between security value and goodwill
- The business trading position
- The borrower's capacity to operate regional supermarket assets
- Settlement timing requirements
Non-binding indicative terms were obtained within a short timeframe, allowing the client to proceed with more confidence.
Outcome
Site 1: Approximately $1.5 million security/property component and $1 million goodwill/business component, with approximately $1.75 million funding secured.
Site 2: Approximately $2.2 million security/property component and $1.2 million goodwill/business component, with approximately $2.3 million funding secured.
Both transactions settled and funded on time. The structure enabled the client to proceed with the acquisitions despite the original funding proposal being below expectation.
Key lesson
Business acquisition finance is not only about the purchase price. Lenders assess industry experience, security value, goodwill, trading performance, borrower contribution and settlement risk. Presenting the transaction properly can materially affect the available structure.
Buying a business or freehold going concern? Speak with Bridle Partners before you commit to the finance structure.
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