Stapled Financing

Stapled financing is a financing package that the seller's advisor has already prepared and offers to potential buyers. Buyers can use this ready-made financing instead of organising their own. This accelerates the sales process and makes bids easier to compare.

The package is prepared by the seller together with one or more banks, which provide an indicative structure covering size, ranking, tenor, margin and covenants, based on the findings of vendor due diligence. The benefit to the seller is several-fold: the field of bidders widens to include those who could not arrange financing themselves, offers become more comparable because they rest on the same financing basis, completion risk falls, and the structure presented sets a reference point for debt capacity and therefore indirectly for price. For bidders the offer is non-binding. Most experienced buyers use it as a starting point and then seek better terms elsewhere.

The bank's role is viewed critically, since it advises the seller and finances the buyer at the same time, so conflicts of interest must be disclosed and the mandates separated organisationally. The instrument is most common in larger transactions and in market phases where financing is harder to obtain.