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Private Credit

What is Private Credit?

Loans are customised to meet the specific needs of borrowers, lenders, or investors, often involving complex features and arrangements. Key characteristics include:

  • Customised Terms: Tailored conditions like flexible repayments, variable rates, or unique collateral.
  • Complex Structures: May include multi-tranche financing with varying terms and repayment priorities.
  • Collateralised: Secured by specific assets or revenue streams.
  • Risk Mitigation: Designed to reduce risks such as credit, interest rate, or currency risks through risk-sharing or hedging.
  • Securitisation: Loans may be pooled and sold as securities, like asset-backed securities (ABS) or collateralized loan obligations (CLOs).
  • Specialised Borrowers: Often used in industries with unique financing needs, such as real estate, project finance, or leveraged buyouts.

Structured loans are arranged by banks, financial institutions, or private lenders for situations where standard loans are insufficient, allowing for customised financing solutions.

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When to use Private Credit

Structured credit products are best suited for investors who understand their complexities and can handle the associated risks. Here’s a concise overview:

  • Institutional Investors: Such as pension funds, insurance companies, and hedge funds, with the expertise to analyse and manage the risks of structured credit products.
  • Sophisticated Investors: high-net-worth individuals and family offices looking for higher returns and able to absorb potential losses, benefiting from the diversification structured credit offers.
  • Retail Investors with Professional Advice: Retail investors, under the guidance of financial advisors, may consider structured credit products for higher yield opportunities, provided they have a high degree of financial literacy and understand the risks involved.

Process and timeframe

Document Collection & Deal Sheet

Identify your target acquisition based on strategic objectives & engage them to ascertain if there is a fit.

Indicative offers

If there is a fit, any funding gap will need to be identified & a strategy put in place to fund it.

Analysis & decision

Once funding is feasible, terms must be negotiated with the vendor. Upon agreeing to a letter of intent, a period of 6 weeks to 6 months follows to finalise the deal.

Due diligence & credit process

Ensuring thorough vetting and alignment of interests with these partners will greatly enhance the efficiency and effectiveness of the due diligence process.

Credit backed offer & legals

Alongside the due diligence, the funding facility deal will be being set up & you will need this in place and ready to go for completion.

Completion

As the deal completes, the corks pop & the fun begins...

Need to know & FAQs

Need to know:
M&A transactions can be complex and completion rates from letter of intent are under 50%. Of those that do complete, not all of them are success stories. M&A can be an absolute game changer for businesses, but it needs deep consideration. As advisors we suggest that business owners and entrepreneurs consider many things before entering into any transaction:

What is the strategic rationale for the deal?

Does the deal align with previously set business objectives? If not, why is it opportunistic and why will it be valuable to the business?

What would failure mean for the existing business?

If the transaction fails to be successful, what does that mean for the current business? If it is potentially disastrous, how can you mitigate this risk in the deal conversation?

When do I think about financing a deal?

From the very outset - even speaking to a target without understanding what you can and can't do is unwise. A bit like starting building work without a budget!

What about culture?

Culture kills companies, and we have seen, even in the most logical of transactions that misaligned culture (and misaligned management) can make a transaction fail and often fail badly.

How are you reaching a valuation?

In the SME world, valuations are often bunk, but there needs to be logic to it. Even if the logic is fuzzy, the buyer must have reasons as to why they are paying what they are paying. Reasons could range from a multiple of [EBITDA] or could be as intangible as 'buying our supplier will save us X over 10 years, so it is worth Y"

Due diligence - how deep should we go?

Ensuring that you get under the bonnet in the due diligence process is essential. Having as much information at your fingertips at least allows you to understand issues and understand the business in depth before signing anything. Deals are often done on intangibles and emotion, but we always advise our clients to at least ensure they have all the information there before going with the same decision.

What are the costs involved?

Any transaction has a fair amount of mouths to feed, so keeping control of costs is an imperative part of the advisors job. Prior to completion, you will have to pay the advisor, the DD provider and the lawyers at a minimum alongside any setup or take on costs of financing. Post completion there may well be considerable costs involved in the integration; in many cases for starters having 2 systems, a new strategy and operational duplication can be costly to unwind, ditto any severance/redundancy costs as well.

Can you give one piece of free advice?

We can give 2 - 1. Be prepared to walk away at any point 2. Align the people involved and the rest usually follows.

Here to help - Get in touch with our team

FBX Capital Partners Limited is registered in England and Wales. No.13456241. Registered office at 238a Telegraph Road, Heswall, Wirral, England, CH60 0AL.
Copyright © FBX Capital Partners. 2025. All rights reserved.
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