Out of the financial recession of the late 2000s, private equity deal flow has rebounded. Even as demand for buyouts grows, attractive targets have failed to keep pace. Abundant capital and available debt have pushed multiples to near pre-recession levels. As a result, sellers have regained lost bargaining power. Sponsors have applied pressure on lenders to be increasingly accommodating in financing documentation.
As competitive pressures have caused terms to become more sponsor-friendly, the concepts below, which were once almost exclusively in the realm of large deals, are being introduced in lower- and middle-market transactions. Given the frothy environment, these concepts should be addressed in the term sheet stage whenever possible to aid more rapid deal execution.
Available Amount/Builder Baskets
Builder baskets are used as a conduit through which built-up cash or equity contributions can be used to make payments or investments that would otherwise be restricted by the terms of the credit agreement. […]
Brian P. Kerwin is chairman of Duane Morris’ corporate practice group and a member of the firm’s national governing partners board. He has extensive experience representing business entities, lenders, private equity funds and entrepreneurs in various business and financing transactions.
David B. Shafer practices in the area of corporate law, with a focus on debt financing transactions. He has experience with acquisition finance, senior secured credit transactions, broadly syndicated transactions, club deals, and subordinated and mezzanine secured and unsecured credit transactions.