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Mezzanine Debt’s Use As A One-Stop Solution

Mezzanine Debt’s Use As A One-Stop Solution

Submitted by • March 10, 2020 www.attractcapital.com

A lot of deal doers, including fund less sponsors and search funds, focus on lower middle market deals of companies with EBITDA ranging from $1.5 to $3.0 million. There is less competition at this end of the market, and savvy buyers can capture an illiquidity premium. Often these buyers come to realize, after they have executed the LOI with the seller, that the universe of lenders is smaller than they envisioned. The amount of total financing needed may range from $2.5 million to $4 million which is a bit of a no-man’s land for the institutional debt market. When the financing amount is split between senior debt and mezzanine debt, it becomes an even smaller loan size. Smaller deals are harder to get done in the lower end of the middle market and require high level conceptualization of the deal structure to have a fighting chance of funding success.

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