Monday, April 10, 2006

I-Banks Pull Back From Stapled Financing

Concerns about conflicts of interest and the current buoyant state of the debt markets have meant fewer M&A deals so far this year have come with much-criticized, but lucrative "stapled" financing attached, according to M&A professionals. Stapled financing is an offer to finance an acquisition made by an adviser to the target. The name comes from a sheet offering financing that is sometimes literally stapled to the term sheet of the deal. By providing stapled financing, the adviser stands to collect both advisory fees from the target and financing fees from the buyer, which are usually larger. However, the staple generally offers less aggressive terms than the buyers could get by going to other banks, so many say that in the current easy financing market, a staple is often more trouble than it's worth.

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