As the COVID-19 pandemic continues to cause turmoil in the global economy and financial markets, debt financing sources are tightening their grip on available liquidity while reassessing existing facilities and lending practices in light of these new market conditions. Many companies have drawn down existing revolvers as a source of liquidity to ride out the downturn. These factors have limited the availability of acquisition financings and resulted in more lender-friendly terms for any newly issued debt, including increased borrowing costs and stricter financial covenants. In light of the current economic circumstances, acquirors who wish to pursue new opportunities could consider a club deal as an alternative to debt financing and a way in which they may pursue larger targets, stretch their available dry powder, and spread their risk across a wider number of investments.
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Harvard Law School Forum on Corporate Governance
