Stapled Finance
Stapled Finance refers to a lending commitment provided by an investment bank that is advising a seller in an M&A setting. The key features are that whoever wins the bidding contest has the option (but not the obligation) to accept the loan offer; and the details of the loan are known in advance (loan size, interest rate, etc.) Arranging stapled finance has become common, and it is taken up by many private equity funds. This paper shows that it is not simply a method to speed up an M&A transaction, or to eliminate the risk of a deal falling through because the winning bidder cannot put together a financing package. We show that the option of accepting a preapproved loan affects the bidding, which becomes more competitive. The seller benefits, because stapled finance increases the expected price. However, the lender cannot expect to break even when offering stapled finance and must be compensated for offering the loan. Even after doing so, the net benefit of arranging stapled finance for the seller is strictly positive. We also show that the benefits of stapled finance accrue only if the pool of bidders includes financial buyers, for example LBO funds.
Stapled Finance Mergers & Acquisitions Takeovers Debt Auctions
Paul Povel Rajdeep Singh
Carlson School of Management,University of Minnesota
国际会议
大连
英文
1-38
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）