Private Credit in SMB Acquisitions: 3 Case Studies

Private credit is reshaping SMB acquisitions by offering flexible, tailored financing solutions where traditional loans fall short.

Here’s how private credit helped three businesses overcome acquisition challenges:

• Manufacturing Company: Secured growth capital through customized debt structures, boosting revenue and production capacity.
• Tech Niche Expansion: Enabled a $4.2M competitor acquisition with specialized funding for IP and operations, doubling market share.
• Software Integration: Funded costly tech migrations and team training with a multi-part credit package, driving recurring revenue growth.

Key takeaway: Private credit provides adaptable financing for SMB buyers, addressing unique challenges like limited collateral, tech integration costs, and competitive market entry.

Private Credit: The Game-Changer in Capital Funding for ...

Case Study 1: Manufacturing Company Acquisition

Challenges in Securing Growth Capital

A well-established manufacturing company looking to be acquired faced significant hurdles in obtaining traditional financing. Buyer Sarah Chen encountered issues like limited collateral, fluctuating revenues, and high working capital demands, making conventional funding options less feasible.

A Tailored Private Credit Solution

Through the Clearly Acquired platform, Chen was able to secure a customized private credit package. This included a mix of senior debt, mezzanine financing, and a revolving inventory line with terms adjusted to align with seasonal revenue patterns.

Results After the Acquisition

Following the acquisition, the company saw increased revenue, better working capital management, and expanded production capacity. This case highlights how private credit solutions can address financing challenges in small and medium-sized business acquisitions.

Case Study 2: Niche Market Expansion

Market Competition Hurdles

Michael Rodriguez, the owner of TechServ Solutions, encountered major obstacles while trying to acquire his top competitor, DataFlow Systems, in the highly specialized data management industry. The $4.2 million price tag was beyond what traditional banks were willing to lend. On top of that, the complex intellectual property (IP) assets of the target company made it difficult for conventional lenders to assess its value.

Keeping operations running smoothly during the acquisition was essential since DataFlow Systems worked with Fortune 500 clients. However, traditional lenders found it hard to grasp the potential benefits of merging these specialized service providers and hesitated to approve funding.

To overcome these barriers, Rodriguez needed a financing option specifically designed for the tech industry.

Private Credit Deal Structure

Using Clearly Acquired's platform, Rodriguez secured a private credit package designed for tech-sector acquisitions. The financing included:

Funding Component	Amount	Purpose
Senior Debt	$2.5M	Main acquisition funding
Subordinated Note	$1.2M	Purchase of IP assets
Working Capital Line	$500K	Support for operational transition

This financing solution offered repayment terms that matched the combined company's expected cash flow. It also included a 12-month interest-only period to ensure a smooth integration of the two businesses.

Market Share Results

The acquisition was finalized in September 2024, and the results were striking within just six months:

• Regional market share climbed from 15% to 28%.
• Client retention hit an impressive 96%.
• Revenue synergies boosted the average contract value by 45%.
• Operating costs dropped by 22% thanks to shared infrastructure.

This case demonstrated how private credit can play a pivotal role in facilitating strategic acquisitions in specialized industries.

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Case Study 3: Software Company Purchase

Tech Integration Costs

A software company encountered high expenses related to system migration, API development, security compliance, and staff training. Traditional lenders hesitated to provide funding due to the complexities of merging different software platforms and the technical risks involved. Addressing these integration challenges required a financing plan tailored specifically to these needs.

Multi-Part Credit Solution

By working with Clearly Acquired's buy-side advisory team, the company secured a private credit package. This included a senior term loan, a facility dedicated to integration expenses, and a revolving working capital line. The payment terms were designed to align with the company's expected revenue growth, providing much-needed flexibility.

Growth After Purchase

After the acquisition, the company saw a boost in recurring revenue, a drop in customer attrition, and more efficient development processes. A satisfied client shared their experience:

"Can't say enough... I honestly can't say enough about Samson and the team at Clearly Acquired... The team was professional and the process was quick. They were able to work their magic, getting us approved and funded in 2 weeks! I write this review as a sincere thank you to the team for allowing our company to continue to thrive." – Kerianne Los

This example highlights how tailored credit solutions can fund acquisitions while ensuring smooth integration and long-term success.

Lessons from All Cases

Challenges Addressed

The cases highlighted above show recurring financing hurdles in SMB acquisitions. Buyers often faced fragmented financing solutions and difficulty meeting traditional loan standards. Examples included funding for manufacturing growth, entering competitive markets, and integrating new technology. In these scenarios, private credit stepped in with customized solutions where traditional lenders fell short.

Financing Strategies

Each case relied on a mix of acquisition funding and additional facilities to cover working capital and operational expenses. These financing setups were carefully aligned with expected revenue growth and post-acquisition needs. This approach directly contributed to noticeable operational gains.

Results Achieved

The outcomes across these cases included enhanced operations, stronger market positions, and improved customer retention. Key factors driving these results were:

• Comprehensive operational insights and accurate financial data
• Well-defined plans for integration or expansion
• Strong alignment between the buyer and the acquired company
• Open and clear communication with lenders

These takeaways highlight how expert guidance and access to diverse funding options are crucial for successfully navigating SMB acquisitions.

Conclusion

Key Takeaways

Private credit has emerged as a powerful tool for SMB acquisitions. The case studies highlight how private credit arrangements help buyers tackle the challenges of traditional financing. Success stories in manufacturing, niche markets, and software integration demonstrate how this financing option meets diverse business needs.

Tools from Clearly Acquired

Clearly Acquired's platform simplifies due diligence with its AI-powered data rooms. It also connects buyers with a variety of financing options. With approximately $6.5 million in monthly transactions and a user base exceeding 65 million ^[1], the platform gives buyers the confidence and resources they need for their acquisition journey.

Steps for Buyers

To make the most of private credit for your acquisition, consider these steps:

• Assess the acquisition's price, working capital needs, and growth potential.
• Organize detailed financial records and create growth projections.
• Seek advice from experts via trusted platforms like Clearly Acquired.

"Another valuable component I receive is guidance around financing a business acquisition. They're not only knowledgeable about SBA options but also offer invaluable insights and experience in creative financing strategies that help get deals across the finish line - especially valuable for someone making their first acquisition." - Derrick Weidenaar ^[1]

Clear planning, expert advice, and the right tools are essential for financing SMB acquisitions. By using modern platforms and exploring private credit options, buyers can approach acquisitions with confidence and achieve their goals.