In this increasingly dynamic transaction environment, the power to move fast and efficiently with private equity deals can be an important differentiating factor for many private equity investors. As more of these deals hit the market, it has become critical that all private equity investors have the ability to quickly access funding, and for that, they need the ability to leverage units, as well as have access to the capital markets to fund their companies.
One method of leveraging is through unitranche’s in the middle, which is a special type of financing option that allows private equity investors to purchase units in companies from a variety of different sources, including venture capitalists, banks, and hedge funds. Because this is such a unique financing option, it is important that investors and private equity investors understand how it works before they decide to pursue it. In fact, there are some issues that should always be considered when purchasing units in a company through unitranche’s, because these issues may be more complicated than traditional private equity financing.
Units in unitranche’s: Unlike traditional private equity financing, unitranche’s does not utilize the same traditional forms of investment and financing that are used in the private capital markets. Instead, unitranche’s makes use of a proprietary funding source that provides investors access to their own private capital sources. This proprietary funding source will typically provide private equity investors with a variety of different types of capital that is based on the value of the units that are being purchased in the deal, including cash and stock. It should also be noted that unitranche’s in the Middle Market does not typically require a down payment, so it is important to carefully review the terms of any deal that you may be involved in prior to signing on the dotted line. Unitranche’s in the Middle Market is one of the most complex financing options for private investors because the value of the units in the units and the amount of the investment itself can be very high.
Private Investors: There are several advantages for a private investor when they consider purchasing units in a deal through unitranche’s. One advantage is that private investors can purchase multiple units in a single investment, and this can be a great way to diversify the types of investments that they make in the future. Another advantage is that private investors may have access to multiple funding sources, which is critical if they are interested in obtaining access to multiple sources of private capital.
If you are looking to obtain private capital, it is important that you understand what type of private equity loans are available in today’s marketplace before you begin to shop around. By fully understanding the details of this new financing form, you can help determine which deals to pursue and what types of units to look at as well.