Financial structuring

Financial structuring refers to the design of the optimal combination of financing instruments — equity, senior debt, mezzanine, convertibles, earn-out — to fund an acquisition, a development programme or a corporate reorganisation, balancing return optimisation, risk management and financial flexibility. It takes into account the company's cash flow profile, covenant capacity, tax environment and the objectives of all capital providers. In LBO transactions, financial structuring determines the leverage ratio, tranche structure and management incentive package that will drive returns over the hold period.

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Example: Hectelion structures the financing of a CHF 40.0 million Swiss acquisition: CHF 20.0 million senior bank debt (TLA + TLB), CHF 8.0 million mezzanine, CHF 12.0 million equity (management + fund). The structure is optimised to: (1) maintain DSCR above 1.30x under downside scenarios, (2) limit leverage to 3.5x net debt/EBITDA for covenant compliance, and (3) generate a 20%+ IRR for equity investors at a 7.5x exit multiple in 5 years.

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Hectelion advises on financial structuring for acquisitions, fundraising and recapitalisations — designing financing packages that optimise risk-adjusted returns for all capital providers.