Financing Sources for LBOs

LBO / M&A financing in India | RBI redraws the playbook 1) Introduction RBI has proposed a calibrated framework allowing banks back into control financing — a space that had steadily migrated to private credit and offshore lenders. 2) Facts Key features emerging from the revised framework: • Acquisition finance includes funding for equity / CCDs that result in control. • Refinancing of the target’s existing debt is permitted where integral to the acquisition. • Control may be acquired in a single transaction or in tranches within a 12-month window. • Banks may fund up to 75% of the acquisition value. • Valuation will be independently assessed by the lending bank. • Eligible acquirer: Indian non-financial company, net worth ≥ INR 500 crore, 3-year profit track record; unlisted borrowers need an investment-grade rating. • Post-acquisition consolidated leverage capped at 3:1 (debt:equity). • Security package to include charge over acquired shares / CCDs plus a corporate guarantee. • A bank’s overall exposure to such financing capped at 20% of eligible capital. • Effective date: 1 April 2026. 3) Analysis This is a calibrated opening of the LBO market • The 75% funding headroom is material and could deepen domestic bank participation, especially in large-cap control deals. • Allowing refinancing of target debt enables cleaner balance sheets at closing and improves underwriting certainty. • The 3:1 leverage ceiling will temper aggressive capital structures; equity cheques remain meaningful. • Eligibility filters (net worth, profitability, rating) signal a preference for established credits over first-time platforms. • Bank-led valuation and exposure caps reinforce prudence and may elongate credit processes. • Multi-tranche acquisition flexibility within 12 months helps staged buyouts and negotiated control transitions. 4) Conclusion The framework increases availability of bank capital for acquisitions, subject to defined leverage, eligibility and exposure parameters. Transactions demonstrating structural bankability and credit compliance will clear faster. #MergersAndAcquisitions #LBO #PrivateEquity #Banking #DealStructuring

🚀 Private Credit is Stealing the Spotlight from Banks in Mega Buyouts – Here’s Why The battle for big-ticket buyout financing is heating up, and private credit funds are winning. Once dominated by banks, the $1Billion+ LBO deal size is now nearly 50% controlled by private credit lenders. Why? Speed, certainty, and flexibility—even if it costs more. The Shift in Power: - Pre-2022: ~80% of large buyouts were financed via syndicated loans (banks pooling together). Private credit’s share? <20%. - 2023: Private credit’s share jumped to 54% — a record high! - 2024 and YTD 2025: Despite a rebound in syndicated loans, private credit lenders still fund 49% of large buyouts. Why the surge? - Volatility scared banks: Tariffs, macro risks made syndicated loans shaky. - Private credit stepped in: Faster execution, no market hiccups, and tailored deals for PE firms. The Fuel Behind the Boom: >> Private credit funds are swimming in cash: - $120Billion raised in 2023 (2nd highest ever). - Mega-funds ($5B+) now dominate—44% of fundraising vs. 20% in 2019. - Big players like Blackstone, Ares, Blue Owl are writing bigger checks than ever. But There’s a Catch… >> Not every deal gets funded. Lenders are picky: - Only "safe" sectors like software, healthcare, and financial services are getting deals. - Higher rates? No problem—PE firms pay up for financing certainty. Private credit is no longer the "alternative" – it’s mainstream. And it’s reshaping how big deals get done. Krishank Parekh | LinkedIn

Is traditional lending slowing you down on the deal front? In today’s M&A landscape, private credit is stepping in and rewriting the playbook for founders and PE sponsors looking for speed and strategic leverage. In the first half of 2025, private credit provided 77% of global LBO financing—bringing higher yields (8.5–10%), faster execution, and tailored debt solutions. Direct lenders are not just matching, but often beating banks when it comes to leverage, sometimes going north of 6x EBITDA (vs. banks at 4–5x), opening up new pathways for growth, recap, and even dividend recaps. What’s driving the switch? • Flexibility on covenants—less red tape, more creativity in structure. • Execution speed—days, not weeks, from term sheet to closing. • Confidence—private credit deal certainty outpaces syndicate banking, even as traditional players get choosier. For founder-owners, that means access to bigger checks and less dilution. For PE firms, it’s a way to close competitive processes fast or refinance with higher firepower. Market risk? Sure—JPMorgan and others are blowing the whistle on aggressive lending, but private credit’s steady default rate and smart structure are keeping most of the big names bullish (and active). If you’re ready to turn dry powder into a competitive edge in 2025, the opportunity is now. Curious what these trends mean for your growth story? Let’s map out your path to deal certainty. #PrivateCredit #M&A #PrivateEquity #FounderLed #DealMaking