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Abstract
Banks financing reluctance is forcing dealmakers to search for alternative financing methods with new contract stipulations. Since banks began to pull back on lending, buyers have explored private investments in public equity (Pipe) and stock-for-stock transactions. These methods may be well-known by name, but the strategic and long-term provisions investors demand are products of the modern market. Reports of collapsed deals get daily mention in M&A circles. One New York partner says a client's purchase recently failed when the buyer was refused a $400 million loan with $200 million in collateral. The occasional syndicate has been useful, but it's out as the standard way to raise equity for cash deals. Lenders are enticing borrowers to refinance and restructure their entities to secure capital. Where bank financing is available for M&A, it often requires spreading risk among multitudes of banks through a club format. A legal result is that contracts include maximum bank lending limits based around equal contributions from other lenders. Pipes are the future of M&A financing. As banks refuse to open lending windows, Pipes are the best and simplest option.