Financing a business acquisition in Switzerland

Prepare a uses schedule covering the price, advisers, due diligence, legal work, taxes and fees, working capital, immediate capital expenditure and a liquidity reserve. Include any personal income needed during the transition and separate payments at signing, closing and later milestones. An acquisition can appear financed in total and still run out of cash because funds arrive after they are needed. Only once amounts and timing are visible should the buyer allocate equity, debt and deferred consideration. Keep purchase funding separate from the operating company's normal cash requirements.

• list every purchase, transaction and transition use
• place each cash requirement on a realistic timeline
• retain separate personal and business contingency reserves

Equity demonstrates risk capacity but should not consume all private liquidity. Bank financing depends on sustainable earnings, collateral, transaction structure and the buyer's profile; it is not automatically available because a valuation supports the price. Investors may add capital but also require governance and economic rights. A seller loan defers payment while remaining debt. Compare ranking, security, interest, duration, covenants and control for every source. The combination should work in a prudent case, not only when revenue and margins meet the most optimistic forecast.

• preserve adequate reserves after the equity contribution
• document ranking, security, cost and decision rights
• test the structure under a credible downside scenario

Start with several years of earnings and normalise exceptional or owner-specific items carefully. Convert profit into cash after taxes, working-capital changes, maintenance and growth investment, and an appropriate salary for the buyer's role. Financing payments must fit inside that amount with headroom for volatility. Customer concentration, seasonality, owner dependence and required modernisation can materially reduce debt capacity even when historical profit looks strong. A sound model shows the base case, downside, assumptions and the point at which liquidity or covenants would become strained.

• reconcile accounting profit with available operating cash
• deduct salary, tax, working capital and necessary investment
• calculate headroom and downside covenant performance

A seller loan can bridge a funding gap or demonstrate confidence, but it needs clear interest, maturity, repayment, ranking, security and default terms. An earn-out makes part of the price depend on future performance and therefore requires measurable indicators, consistent accounting rules, information rights and boundaries around decisions that influence the result. Neither device makes an excessive price affordable by itself. Model the maximum payment and potential conflicts, then ensure that bank documents, purchase terms and governance rules do not contradict one another.

• define ranking and repayment for any seller financing
• choose verifiable earn-out measures and accounting rules
• align variable payments with bank and purchase documents

The financing package should present the buyer, company, transaction perimeter, price, sources and uses, historical results, forecast, risks, collateral and transition plan. Link assumptions to evidence and reconcile every version with due-diligence findings. Explain the buyer's experience, future role and first-year priorities because lenders assess execution as well as numbers. Maintain one controlled financial model and a log of changes. Sending inconsistent forecasts to the seller, bank and investors reduces credibility and makes it difficult to understand which structure is actually being approved.

• present sources and uses in a single reconciled schedule
• tie forecasts and risks to due-diligence evidence
• document the buyer profile, governance and transition plan

A lender commonly asks for the buyer's profile and financial position, company accounts and current trading, budgets and liquidity forecasts, transaction terms, sources and uses, equity evidence, security information and due-diligence findings. Requirements vary by sector, structure and risk. A coherent package helps the lender ask useful questions, but it does not replace formal credit approval. Material changes in price, performance or transaction structure should be disclosed before closing conditions are assumed to be satisfied.

It is difficult because the buyer contributes no financial risk buffer and the entire price, costs and transition burden must be supported by other funding. Exceptional structures may exist, but they still require strong cash flow, security or seller and investor support. The buyer also needs reserves for working capital and unexpected costs. Treating a seller loan as if it eliminated the need for risk capital can leave the acquired company overleveraged and unable to fund normal investment.

A seller loan is legally debt, although a senior lender may give it partial quasi-equity treatment when it is deeply subordinated, long-dated and restricted from repayment. That treatment depends on the actual terms and lender policy. The buyer should not assume it. Interest, maturity, ranking and repayment triggers must be modelled, and the purchase agreement should align with the financing documents so that one payment obligation does not cause a default under another.

The amount depends on seasonality, payment terms, customer concentration, investment, transition costs and the reliability of forecasts. Prepare a monthly liquidity model and identify the lowest cash point under both base and downside scenarios. The reserve should cover plausible delays and shocks without immediately breaching financing terms. It is also prudent for the buyer to retain personal liquidity outside the business rather than relying on distributions that may not be available during the first months.

It can bridge different expectations by making part of the price conditional on future results, but it also creates new disputes about measurement and control. The parties need clear indicators, periods, accounting policies, access rights, treatment of exceptional events and consequences of a resale or management change. An earn-out works best when the relevant outcome can be measured objectively and neither party can manipulate it easily. It should complement, not replace, a realistic valuation.

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