As an entrepreneur, the idea of acquiring a company may one day become an obvious next step. Once your project is clearly defined and your target identified, the acquisition process involves several key steps: establishing a robust valuation and building a solid financial plan. These two pillars allow you to confirm the feasibility of your project and ensure alignment between your ambitions and the reality of the target company. Once these steps are validated, the question of acquisition financing arises, with several levers and solutions available to you.
Equity contribution: how much should you plan for?
Beyond bank financing and potential contributions from third-party investors, part of the acquisition must be financed through your own equity. There is no legal minimum amount, but in practice, the Belgian market typically requires an equity contribution of around 25 to 30% of the total purchase price. This may vary depending on the buyer’s profile, the nature of the target, its existing debt structure, and the quality of the financing proposal presented to the bank.
In certain specific cases, higher leverage structures can be achieved. We have already successfully implemented such deals at BestValue, thanks to rigorous preparation and strong banking relationships. However, these remain exceptions, and we consistently make our clients aware of the potential pressure such structures can place on the target’s post-acquisition cash flow.
Bank financing: the cornerstone of acquisition funding
Banks remain the central partner in any acquisition. They typically finance the remaining portion of the deal after equity contribution, over a period of 7 years, which can extend up to 10 years when real estate is part of the transaction.
To convince your bank, you will need a solid business plan and a clearly demonstrated repayment capacity. It is important to note that banks focus primarily on the earning capacity of the acquired company rather than on the buyer’s personal wealth. Their analysis covers all cash flows of the business—operating, investing, and financing—to assess whether the company can effectively fund its own acquisition through the cash it generates over the repayment period.
Complementary tools: vendor loan and earn-out
When bank financing is not sufficient to complete the deal, two mechanisms can help structure the transaction.
A vendor loan, or seller loan, involves asking the seller to defer part of the purchase price. In this case, the seller temporarily acts as a lender to the buyer, usually in exchange for a higher interest rate than that of a traditional bank loan, reflecting the additional risk assumed.
This mechanism offers a strategic advantage: it often reassures the bank, as the vendor loan is considered part of the buyer’s financial commitment, strengthening the credibility of the acquisition structure. It is a strong signal of mutual trust and is increasingly used in small and mid-market transactions in Belgium.
An earn-out works differently: part of the purchase price is conditional on achieving predefined objectives, most often financial targets. If the agreed performance is met after the transaction, the seller receives the additional payment. This mechanism helps bridge valuation gaps between buyer and seller but requires clear, pre-agreed KPIs to avoid post-closing disputes.
Leveraged Buy-Out (LBO)
The LBO is the standard acquisition structure for share deals. In this model, the holding company takes on the debt, and the acquired company’s dividends are used to repay it. This structure is used in 99% of share transactions, notably due to the tax advantages between related companies.
Market evolution matters
The market has evolved significantly in recent years. The rise in interest rates between 2022 and 2024 has mechanically reduced buyers’ borrowing capacity, compressing valuations—particularly in the small SME segment. EBITDA multiples effectively paid in the Belgian small-cap market (companies with less than €5 million in revenue) now typically range between 4.5x and 6x, far from some publicly quoted figures. This creates real opportunities for well-prepared and well-financed buyers.
There is no one-size-fits-all structure. The right financing setup depends on your profile, the target company, and market conditions at the time of the transaction. What does not change is the importance of anticipation: the more you structure your financing in advance, the more credible and responsive you will be when the opportunity arises.
You want to assess your financing capacity before pursuing an opportunity? Contact BestValue.
