A Bridge Too Far? Private Equity Bridge Financing and Facilities

Bridge loan facilities are short-term loans that are used by borrowers until they are able to secure permanent financing for an acquisition. In the private funds context, private equity funds use bridge financing as a tool to provide the immediate cash necessary to complete transactions in advance of calling capital from fund investors. Many mid-market and large-market mergers and acquisitions require the acquiring party to provide proof of financing to quickly complete a transaction; however, purchasers may have a hard time putting long-term financing in place before closing. An acquirer may thus bridge the gap by obtaining the short-term, or “bridge,” financing necessary to sign a purchase agreement, and then secure long-term financing once the acquisition has been consummated.

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Related Content

• Equity Commitment Letter (Private Equity Sponsor)
  Review this letter that evidences a private equity sponsor’s commitment to provide equity financing for the acquisition of a fund’s portfolio company. 
• Private Equity Financing Provisions
  Study these financing provisions commonly used in acquisition agreements for private equity buyers to provide representations and warranties and related covenants regarding a financing commitment.

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