Sources: PE equity contribution (typically 40–50% of total capital), senior bank debt (40–55%), private debt / unitranche (sometimes layered on senior), vendor loan from the seller (15–25%), and sometimes mezzanine debt or PIK notes. Uses: enterprise value (purchase price), existing debt refinancing (if the company has bank debt that doesn't carry over), transaction fees (legal, financial advisory, due diligence — typically 3–5% of deal value), and sometimes a cash buffer for working capital.
For sellers, the Sources and Uses table reveals the true financing picture: how much of the purchase price is coming from the PE fund's own equity versus how much is being lent by banks, and how much the seller is financing via a vendor loan. A headline price of €20m financed with €8m PE equity, €9m bank debt, and €3m vendor loan means the seller is providing 15% of their own purchase price. This is not always fully appreciated when negotiating the headline number.
The Sources and Uses table also reveals fee leakage. In a €20m deal with €800k of transaction costs (4%), the seller receives €20m of enterprise value minus net debt minus those fees — but only if fees are in the 'uses' column. If the buyer has structured it so that some fees are charged to the acquired company post-closing, the seller's proceeds are unaffected but the company's EBITDA and cash are reduced in the earnout period.
Sources & Uses table
Uses: Purchase price €20.0m, refinance existing bank debt €1.5m, transaction fees €0.9m, working capital reserve €0.6m. Total uses: €23.0m. Sources: PE equity €9.2m (40%), senior bank debt (Bpifrance-guaranteed) €10.35m (45%), vendor loan €3.45m (15%). Total sources: €23.0m. Seller receives: €20m EV minus existing debt €1.5m minus net working capital shortfall (if any) = equity value.
Frequently asked questions
Who pays the transaction fees in an M&A deal?
Typically split: the buyer pays its own advisor fees (financial due diligence, legal SPA negotiation, banking arrangement fees); the seller pays its own advisor fees (sell-side M&A, legal, QoE if commissioned). Both sides' fees are often deducted from the respective party's proceeds at closing. Some deals have the acquired company pay certain fees — sellers should resist this as it reduces the company's post-closing cash.
What is a typical PE equity contribution percentage for French SME LBOs?
In the current environment (2024–2026), with bank leverage at 3–4× EBITDA, PE equity contributions typically represent 40–55% of total capital for mid-market French SME LBOs. Higher growth or higher quality businesses can support more leverage, reducing the equity requirement. Lower EBITDA businesses or volatile sectors require more equity, raising the equity contribution.
Can Bpifrance participate in the sources side of a French LBO?
Yes — through multiple channels: (1) Bpifrance's 'garantie transmission' guarantees 50–70% of bank acquisition loans, improving bank appetite and often reducing interest rates; (2) Bpifrance Investissement can co-invest directly as a minority equity partner alongside PE funds; (3) Bpifrance offers subordinated debt instruments (prêts participatifs, obligations convertibles) that can fill the gap between senior bank debt and PE equity.