Traditional acquisition financing stacks senior bank debt (lower rate, tighter covenants, amortizing) on top of mezzanine debt (higher rate, looser covenants, PIK or bullet). A unitranche collapses these two layers into a single facility with a single lender, a single set of covenants, and a blended rate (typically between the senior and mezzanine rates). The simplicity is valuable: one negotiation, one set of documentation, no inter-creditor agreement.
Unitranche lenders in France and Switzerland include: Tikehau Capital, Ardian, Eurazeo, ING Direct Lending, and specialist mid-market private debt funds that specifically target €5–50m facilities. These funds are more flexible than banks on leverage (typically up to 5–5.5× EBITDA vs 3–4× for banks), PIK options, and covenant structures — but charge higher rates (typically 6–9% all-in vs 3–5% for bank senior).
For sellers, unitranche financing in the buyer's structure means the buyer can afford to pay more (higher leverage) and close faster (simpler documentation). The downside for sellers with vendor loans or earnouts: unitranche lenders often impose restrictions on junior obligations (inter-creditor agreements), limiting the seller's ability to enforce payment if the business underperforms.
Bank senior vs unitranche comparison
Acquisition: €15m EV, EBITDA €2m. Bank senior structure: €7m bank debt (3.5× EBITDA) at 4.5% + €2m mezzanine at 9% + €3m PE equity + €3m vendor loan. Unitranche structure: €9m unitranche (4.5× EBITDA) at 7.5% + €4m PE equity + €2m vendor loan. Unitranche: simpler (one lender), higher leverage (vendor loan reduced), but €270k/year more interest cost.
Frequently asked questions
Is unitranche more expensive than traditional bank financing?
Yes — typically 2–4% per annum higher all-in rate. For a €8m unitranche vs €8m bank senior facility, the incremental cost is €160–320k/year. Buyers accept this cost because unitranche offers: higher leverage (allowing lower equity contribution), faster execution (3–4 weeks vs 6–8 weeks for bank syndication), more covenant flexibility (no quarterly maintenance tests in many structures), and a single point of contact for amendments and waivers.
What is the difference between unitranche and private debt?
Private debt is the broader category — any non-bank lending to companies, including direct lending, mezzanine, PIK notes, and unitranche. Unitranche is a specific instrument within private debt: a single blended-rate facility replacing both senior and subordinated tranches. All unitranches are private debt; not all private debt is unitranche.
Is unitranche available for SMEs below €5m EBITDA?
Less commonly — most unitranche funds have minimum facility sizes of €5–10m, limiting their availability to businesses with at least €1.5–2m EBITDA at 4× leverage. Below this threshold, the traditional bank + vendor loan or bank + Bpifrance structure is more practical. The French market has seen growth in smaller unitranche offerings (€3–7m facilities) from boutique private debt funds, but coverage is thinner than for larger transactions.