TOOLS

M&A Financing ^Calculator

The M&A Financing Calculator helps estimate the balance of debt and equity financing required for acquiring a business. Ideal for SMEs planning an acquisition, it provides a quick overview of funding needs and serviceability metrics. For more detailed options, consulting platforms like business loans and equity finance services can offer live quotations and tailored advice.

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How To Use The M&A Financing Calculator

Collect deal figures

Gather key numbers including the target purchase price, expected transaction fees, projected EBITDA, and any working capital adjustments to capture the full cash outlay. Understanding these figures is crucial for accurate modelling. You may also find guidance on business valuation helpful for assessing deal value.

Enter financing assumptions

Input your preferred leverage multiple, the interest rate on debt, repayment term, and any planned equity contribution. This data allows the calculator to estimate your maximum debt capacity and debt serviceability ratios. For help with terms, see our business loans explanations.

Review projected outputs

Examine the total funds required for the acquisition, suggested debt amount, equity gap, and coverage ratios like the DSCR. These outputs can be exported or shared to support discussions with boards or potential lenders. Further reading on loan eligibility may assist preparation.

^Benefits of Using the M&A Financing Calculator

An M&A Financing Calculator is an essential tool for businesses considering mergers and acquisitions. It helps users quantitatively assess different financing options and their implications on overall deal structures, making it easier to project future cash flows and determine the necessary capital requirements. By providing instant calculations and analysis, this tool supports companies in making informed and strategic financial decisions during complex transactions, ultimately contributing to successful mergers and acquisitions.

This calculator provides instant insights on whether a deal fits your financial tolerance, avoiding over-leverage early in the process. By tailoring bids and negotiating confidently with lenders, you can save time and advisory costs. Explore more about debt financing and equity finance to understand your options better.

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How M&A Financing is Calculated

Total acquisition cost

Adds price, fees, and adjustments.

Total acquisition cost

Total acquisition cost is calculated by adding the purchase price, transaction fees, and any working capital adjustments. This sum reflects the full cash requirement and is essential for planning funding needs accurately.

Debt capacity multiple

Uses EBITDA times leverage.

Debt capacity multiple

Maximum debt amount is estimated by multiplying the target’s EBITDA by the chosen leverage multiple. EBITDA represents earnings before interest, tax, depreciation, and amortisation, while leverage multiples for SMEs typically range between 3 and 5 times EBITDA.

Debt service coverage

Checks EBITDA against repayments.

Debt service coverage

The Debt Service Coverage Ratio (DSCR) measures cash flow available to cover annual debt payments including interest and principal. It is calculated as (EBITDA minus tax and capital expenditure) divided by the annual debt service. Lenders in the UK generally require a DSCR above 1.25 for loan approval.

Understanding Your M&A Financing Calculator Results

Compare funding gap

Review the difference between the total acquisition cost and the maximum debt the business can support. The shortfall represents the equity or vendor finance you need to provide.

Test leverage sensitivity

Experiment with different leverage multiples to see how increasing debt affects your debt levels and DSCR. Most SME acquisitions maintain leverage lower than 4 times EBITDA to keep repayment manageable.

Factor hidden costs

Note that the calculator does not include arrangement fees, break costs, or covenant reset charges. Add buffers for these and carefully read lender terms before making funding decisions.