The market for mezzanine financing on the upswing

Mezza­nine finan­cing is gene­rally conside­red for compa­nies that have estab­lished them­sel­ves sustain­ably on the market with their busi­ness model and products and would like to solidly secure their further growth not exclu­si­vely through loans, but through balance sheet-impro­ving funds. Espe­ci­ally when no change in the share­hol­der struc­ture is desi­red or possi­ble, but the finan­cing is to have an equity or equity-like effect, mezza­nine finan­cing is an attrac­tive suita­ble finan­cing instrument.

Due to the ongo­ing inte­rest payments, mezza­nine finan­cing is rather unsui­ta­ble for compa­nies in the start-up or early stages and for compa­nies in a restruc­tu­ring situa­tion. Here, direct parti­ci­pa­tion is the “right” finan­cing instrument.

In times of vola­tile capi­tal markets and low bond inte­rest rates, mezza­nine port­fo­lios offer inves­tors a very inte­res­t­ing current yield. Howe­ver, it is important that mezza­nine port­fo­lios are assem­bled and mana­ged by expe­ri­en­ced mana­gers after careful (private equity-like) exami­na­tion of the indi­vi­dual compa­nies. The stabi­lity of the finan­ced compa­nies is the decisive compo­nent for inves­tor success.

What compa­nies appre­ciate most about mezza­nine finan­cing is the flexi­ble struc­tu­ring opti­ons (silent part­ner­ship, profit parti­ci­pa­tion rights, subor­di­na­ted capi­tal, etc.), which allow the finan­cing to be tail­o­red to the indi­vi­dual finan­cing occa­sion, the initial balance sheet situa­tion and the inte­rests of manage­ment and share­hol­ders. Next to it is

• the long term of the capi­tal (usually 5 to 7 years),
• gran­ting without the requi­re­ment to provide colla­te­ral (exis­ting colla­te­ral is thus available for other finan­cing, thus incre­asing the scope for credit creation),
• the preser­va­tion of entre­pre­neu­rial independence
• and, last but not least, the “quality seal” effect that mezza­nine finan­cing has on other finan­cing and market part­ners is very inte­res­t­ing for companies.

Before the launch and after the expiry of the stan­dard mezza­nine programs, the condi­ti­ons for mezza­nine finan­cing proved to be quite “price stable”. I ther­e­fore do not expect a propor­tio­nal increase in terms and condi­ti­ons even if the gene­ral inte­rest rate level rises.