Dow Schofield Watts llp

BRIDGE FINANCING

"Strategies to reach a target previously out of reach"

The rights issue is the traditional means by which UK Plc's raise funds for acquisitions.  Bank Bridge financing covers the time difference between the purchase of the target company and the completion of the rights issue.  Bridge financing is a means to quick financing and also is a critical tactic in takeovers, saving precious time and lending credibility to takeover offers by less well known or undercapitalised companies.  

The mitigating factors to reduce the risks inherent in a bold acquisition are the reputation of the company's management, obvious synergies derived from the transaction and a planned divestiture programme.

 In hostile takeovers, underwriting is more expensive because:

      period of risk is longer;  and

      the defendant will normally attack the acquirer's record.

The vendor reinvests in a combination of:

        Preference shares

       Unsecured loan notes

       Performance price supplement, particularly if the sale is at a discount to net assets

High levels of debt can be offset almost immediately with property sale and leaseback.