Are you considering a merger or acquisition transaction for your business this year? If so, you’re not alone.
Despite continued cost pressures and economic uncertainty, growth remains firmly on the agenda for many Irish SMEs. Our latest research shows that 65% are actively exploring merger or acquisition activity, reflecting a clear desire to scale, strengthen market position and build long-term resilience.
This increased M&A activity in the Irish market is being driven by a combination of economic stability, strategic access to the EU, industry consolidation, technological advancements, availability of capital, and the desire for strategic positioning and diversification. We are also continuing to see acquisition activity linked to succession planning, ownership transition, consolidation and strategic expansion. These transactions can preserve established businesses, skills and employment while providing a platform for further investment, innovation and long-term growth.
One key trend emerging from this activity is that businesses are increasingly focused on funding structures rather than funding sources. Instead of relying on a single lender, many transactions now involve a blend of traditional debt or equity, asset-based lending and Invoice Finance. The objective is not simply to secure enough capital to complete the deal, but to ensure the business retains sufficient liquidity and flexibility to support integration and the opportunities the transaction was intended to create.
In the case of Invoice Finance, businesses can gain access to cash tied up within their sales ledger, rather than having to wait 30, 60 or even 90 days to be paid. This can be particularly valuable in M&A situations, where preserving liquidity is often just as important as funding the acquisition itself. By leveraging existing receivables, businesses can support acquisitions, ownership transitions, expansion projects and restructuring activity without placing unnecessary pressure on operating cashflow.
So, for example, if you have €300,000 or €3,000,000 currently owed to you by your clients, Invoice Finance can allow access up to 90% of the invoice’s value within 24 hours. The remaining balance, less an agreed fee, is made available once the customer settles the invoice.
Invoice Finance is best viewed as a revolving source of working capital. As businesses raise invoices, they can continue to release cash from those invoices rather than relying on a fixed lump sum or loan that eventually needs to be repaid. As customers pay, availability is replenished and the cycle continues. Because the facility is linked directly to trading activity, available funding can increase alongside turnover, creating a source of working capital that evolves with the business and supports future growth, longer payment cycles and changing funding requirements.
The benefit is that you can access multiples of the funding required, compared to a fixed line of credit, reducing reliance on additional acquisition debt while preserving liquidity to trade, invest and pursue the opportunities the acquisition was intended to create.
A recent transaction we worked on demonstrates this blended approach. A services group required €4 million towards the €5 million acquisition of a competitor. Cashflow constraints meant the business could sustainably support €2 million through a bank facility. Invoice Finance formed part of the wider funding package, providing the additional €2 million required to complete the transaction while preserving working capital. The result was a funding solution that supported both the acquisition consideration and the ongoing needs of the business.
As evident from this example, it’s important that when funding an acquisition, the focus should not simply be on how to complete the transaction. The more important question is whether the business will have sufficient liquidity and working capital to support integration and deliver on the opportunities the acquisition was intended to create. The objective should be not simply to complete the deal, but to ensure the business remains well positioned for its next phase of growth.
Businesses and their advisers need to consider not only the purchase price, but also integration costs, future investment requirements and the working capital demands of the combined operation. A successful transaction requires sufficient financial headroom and flexibility to support both the acquisition and what comes next.
What is increasingly clear is that Irish businesses benefit from having access to a broader range of funding options than ever before. Traditional banks, alternative lenders and specialist providers all have an important role to play. Greater collaboration across the funding ecosystem gives businesses more choice and allows funding structures to be built around the needs of the business, rather than the limitations of any single product or provider.
In periods of economic uncertainty, the quality of the transaction and the strength of the funding structure become even more important. The most successful acquisition structures are rarely those that maximise leverage. They are the ones that leave the business with sufficient liquidity, working capital and financial flexibility to deliver on the opportunities the acquisition was intended to create.
Considering an acquisition, management buyout or ownership transition?
Understanding the right funding structure can be just as important as identifying the right opportunity. To learn more about the funding options available to support M&A activity, including how working capital solutions can complement traditional debt, visit Bibby Financial Services' guide to funding business acquisitions: Funding Business Mergers & Acquisitions.