Whole-business securitization (WBS), a strategy where a firm issues debt secured against virtually all of its profitable assets, is garnering more attention from dealmakers looking to handle M&A financing costs or boost comprehensive leverage. This structured finance product has – till now – flown somewhat under the radar, but it’s increasingly being utilized as a key tool for financial management in M&A operations.
WBS relies on segregating a company’s assets into a separate legal entity, or bankruptcy-remote vehicle. This is done to insulate the bulk of the firm’s assets from bankruptcy risk. By securitizing all cash-yielding assets, corporations are better prepared to manage costs associated with M&A.
Even though WBS had a lesser-known status in the financial world, it has long been utilized in certain industries with trigger events signalling the prospect increase. For example, among fast food chains where the franchises constitute a vast quantity of cash-yielding assets.
In our increasingly globalized and financially intricate corporate landscape, more dealmakers are searching for innovative strategies to manage and leverage costs. Given the wide spectrum of assets that can be brought under the umbrella of WBS – including intellectual property, franchises, and even tangible properties – it is no surprise that the strategy is making its way onto the M&A radar.
As the WBS strategy continues to gain traction, it’s evident that companies are striving for diverse ways to position themselves for success in the global marketplace. The intricate ties between legal structuring, corporate finance and M&A strategies illustrate the complex landscape corporations must navigate in today’s ever-evolving business world.