capital-formation
What should sponsors compare across acquisition debt term sheets?
They should compare leverage, pricing, amortization, covenants, collateral, fees, prepayment terms, reporting, certainty, and lender behavior.
Debt terms affect post-close flexibility as much as purchase price capacity. For sponsors assembling closeable financing for acquisitions and single-deal vehicles, the practical answer is to treat the question as part of equity commitments, debt financing, rollover capital, seller financing, reserves, closing funds flow, and investor allocation, not as a one-off definition. The record should show sources and uses, investor commitments, lender term sheets, rollover agreements, seller notes, reserve assumptions, funds flow, and closing checklist so an investor, lender, counsel, administrator, or operating lead can reconstruct the decision later. Build a comparison matrix that shows economic cost, covenant headroom, reporting burden, funding conditions, and operational constraints. The common failure mode is selecting the highest leverage offer without pricing the risk of tight covenants, heavy amortization, or uncertain closing conditions.
Related glossary terms
Related questions
What should a sponsor include in a sources and uses schedule?
It should show purchase price, fees, expenses, debt, equity, rollover, seller financing, reserves, working capital, and any closing adjustments.
How should sponsors decide how much equity to raise for a deal?
They should size equity against purchase price, debt capacity, required reserves, working capital needs, fees, downside scenarios, and investor return targets.
How should seller financing be shown in the capital stack?
It should be shown with principal amount, interest, maturity, amortization, subordination, security, payment restrictions, and default rights.