Mergers and Acquisitions (M&A) are some of the biggest steps a business can take to grow. But behind every successful deal is a smart financial plan. M&A financing helps companies grow, expand their reach, or enter new markets.
The M&A landscape in Canada continues to evolve. Many family-owned businesses want to retire. They are selling their companies. Tech firms are also buying smaller startups.
Companies in different industries see acquisition strategy as a key to business growth and operational efficiency. In today’s competitive landscape, Canadian businesses are increasingly using mergers and acquisitions to achieve economies of scale, enter new markets, or integrate vertical supply chains. This trend is particularly strong in industries like healthcare, technology, and advanced manufacturing.
At Express Business Funding, we provide alternative finance solutions that are built to support Canadian businesses through the M&A process.
Key Takeaways
- M&A financing helps companies buy or merge with others using strategic funding.
- Good planning—including valuation, due diligence, and deal structuring—is key.
- Choosing an experienced financing partner ensures a faster and smoother process.
- EBF offers flexible funding made just for mergers and acquisitions.
What Are Mergers and Acquisitions?
Mergers happen when two companies of similar size join forces. They usually create a new business with a new name. Acquisitions happen when one company buys another. This can be a full purchase or a majority ownership (at least 51%).
Types of Mergers:
- Horizontal mergers (same industry competitors)
- Vertical mergers (companies in the same supply chain)
- Conglomerate mergers (companies in unrelated industries)
- Reverse mergers (private company buys a public one)
Types of Acquisitions:
- Friendly acquisitions
- Hostile takeovers
- Management buyouts (MBOs)
- Leveraged buyouts (LBOs)
Most deals are friendly and aim to expand operations, drive strategic planning, or increase financial health. Hostile takeovers are less common but get more media attention.
What is M&A Financing?
M&A financing gives companies the money needed to complete a purchase or merger. This can cover the entire deal or just part of it.
Sources of M&A Financing:
Common Options:
- Term loans: Fixed repayments over time
- Revolving credit facilities: Reusable credit as needed
- Asset-based lending: Loans secured by assets
- Seller financing: The seller helps fund the deal. Seller financing can make transactions smoother by spreading payments over time. It is often used to bridge gaps when traditional lenders are cautious about full deal funding.
- Mezzanine financing: Hybrid of debt and equity, often used for growth. Mezzanine financing offers flexible terms and can be less restrictive than senior debt. The ideal option for businesses that expect strong future cash flow is to minimize immediate ownership dilution.
- Equity investments: Bring in investors to share ownership
Choosing the right option depends on the deal’s size, timeline, and goals. At EBF, we build custom M&A financing plans that support your corporate finance and business expansion vision.
The M&A Financing Process: Step by Step
1. Business Valuation
First, figure out how much the target company is worth. Some common methods:
- Comparable Company Analysis (CCA)
- Discounted Cash Flow (DCF)
- Asset-Based Valuation
- Market Capitalization
This helps set a fair price and funding amount.
2. Due Diligence
Due diligence checks the target company’s financial health, legal structure, and business operations.
- Financial Check: Review cash flow, revenue, and debt
- Legal Check: Look at contracts and risks
- Operations Check: Analyze staffing, systems, and supply chains
- Compliance Check: Confirm they meet industry rules
3. Deal Structuring
Next, decide how the deal will be structured:
- Asset purchase: Buy only specific parts of a business
- Stock purchase: Buy shares to gain control
- Merger: Combine two companies
- Joint venture: Work together on shared goals
- Earn-out: Tie part of the price to performance
Each option affects tax implications, financing needs, and legal terms.
4. Regulatory Compliance
Make sure the deal meets all local, national, and international rules:
- Antitrust regulations (to avoid creating monopolies)
- Securities rules
- Cross-border transactions (for global deals)
- Tax laws and strategic planning
Cross-border transactions often require navigating multiple jurisdictions’ tax codes, employment laws, and banking regulations. Careful planning and expert financial consulting are critical to ensuring seamless, legal cross-border M&A activity.
Having a financial consulting team helps ensure you stay compliant.
Choosing the Right M&A Financing Partner
Kevin Fagundes, COO at EBF, says:
“Your financing partner isn’t just there to provide funds. They help shape the deal and its success.”
Look for a team that:
- Focuses on M&A financing, not just general business loans
- Has a proven track record (ask for case studies and client success stories)
- Can adapt financing options to your deal
- Offers expertise in complex financial solutions
Red Flags to Watch Out For:
- One-size-fits-all loan offers
- No clear M&A experience
- Lack of transparency on fees or timelines
Avoid general lenders. Choose a financing partner like EBF that understands your goals.
Frequently Asked Questions About M&A Financing
What’s the most common way to finance an acquisition?
Many companies use both equity and debt to balance control and risk.
How long does it take to get M&A financing?
Timing depends on the deal, but working with experienced lenders like EBF can make it much faster.
Is this type of financing risky?
Like all loans, there’s risk—but planning and expert advice reduce it.
Can it be used for international deals?
Yes. We offer cross-border financing options for global deals.
How is asset purchase different from stock purchase?
An asset purchase buys specific items; a stock purchase buys ownership and control.
Why is business valuation so important?
It ensures you don’t overpay—and it helps set realistic funding goals.
What are the biggest challenges in M&A financing?
Finding accurate valuations, managing integration risk, and navigating complex regulations are the top financing challenges.
Can startups or small businesses use M&A financing?
Yes. If your business has clear growth goals and a solid plan, financing can help acquire smaller targets or assets.
Conclusion: Grow Smarter with M&A Financing
Mergers and acquisitions can transform your business. But they need planning, funding, and the right team behind them.
Express Business Funding is here to guide you through the process with tailored financing solutions. We’ve helped many Canadian companies navigate their biggest deals with ease.
Whether you are acquiring a competitor, merging to scale your operations, or strategically entering a new market, having a smart financing partner makes all the difference. At Express Business Funding, we’re ready to help you achieve a stronger, smarter future.
Contact EBF today to learn how we can support your next big move.
