Smart Ways to Finance a Business Acquisition in Singapore
Thomson Medical Group’s USD381.4 million takeover of Vietnam’s FV Hospital stole the headlines in 2024, marking the largest healthcare deal in Southeast Asia since 2020. This deal reflected a larger pattern of growing activity in the region. Singapore’s M&A market roared ahead, with deal values jumping 41% to USD82 billion and 16 business acquisition deals topping the billion-dollar mark, setting the tone for a vibrant 2025.
In particular, lower borrowing costs and rising CEO confidence across Asia-Pacific have supported this momentum, with more than 60% of CEOs planning the deal now. For many companies, the appeal of a business acquisition in Singapore is clear. The harder part is choosing the right business acquisition financing mix to balance growth opportunities with financial discipline.
What is an acquisition in business?
An acquisition in business occurs when one company purchases another to form a new business entity. When two companies combine, the acquiring business takes control of the target company’s assets, operations, or company’s shares.
Merging companies and forming a new legal entity can boost market share, increase market power, and strengthen competitive edge. These business combinations also help achieve cost savings, open doors to market entry, and create a new company positioned for long-term growth in the business world.
Acquisition types at a glance
Companies can pursue different types of deals depending on strategic goals:
- A horizontal acquisition occurs when an acquiring company buys a competitor from the same industry to expand market share.
- A vertical acquisition occurs when an acquiring firm targets a supplier or distributor to strengthen the supply chain.
- Conglomerate acquisitions involve acquiring businesses in unrelated industries, and congeneric acquisitions focus on complementary products or services.
- Stock acquisitions and asset purchases allow the acquiring company to take control of acquired assets with varying degrees of integration.
- Hostile acquisitions occur when an acquiring firm bypasses management to secure target companies.
Importantly, each deal should tie into a larger acquisition strategy, shaping which targets to chase, how to structure the transaction, and how it advances long-term goals. Understanding all these fundamentals can lay the foundation for smart decision-making and secure the right financing.
What is acquisition finance, and why does it matter?
Acquisition finance is the funding a company uses to buy another business, covering the purchase price and transaction costs. This capital can come from the company’s cash reserves, external loans, equity investors, or a combination of these sources.
A common type of acquisition finance is leveraged finance. In this approach, the buyer uses borrowed funds, often secured against the target’s assets, projected cash flows, or the combined company’s balance sheet, to complete the transaction.
Acquisition finance vs leveraged finance: See the difference in action
Imagine a small café for sale. Using acquisition finance, you might pay the owner with a mix of your own savings, a bank loan, and a partner’s contribution, covering the purchase and setup costs.
Leveraged finance, by contrast, involves taking a loan to buy a bigger or more popular café than your savings alone would allow, with the café’s equipment, inventory, or expected profits backing the loan. This approach lets you pursue a larger opportunity. However, it increases financial risk if the business underperforms.
Financing decisions are integral to a company’s merger and acquisition strategy. They determine which targets are realistically attainable, how the deal is structured, and how integration and exit plans are executed. When acquisition and leveraged finance are aligned with strategy, companies can pursue growth and market expansion efficiently; misalignment, however, can turn deals into costly mistakes.
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The main ways to finance a business acquisition
Financing can take several forms. The right structure depends on the deal size, the company’s balance sheet, and the acquisition strategy. Broadly, the main ways to finance an acquisition include debt, equity, hybrid, and alternative methods. Together, these options shape the structure of corporate finance transactions and determine how risks and rewards are allocated.
| Financing type | Capital source | Advantages | Trade-offs |
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| Debt financing | Loans from banks or institutions—sometimes via leveraged finance—secured against assets or cash flows |
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| Equity financing | Capital from shareholders, either through new share issues or reinvested profits |
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| Hybrid financing | A mix of debt and equity, such as mezzanine finance or convertible instruments |
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| Alternative financing | Non-traditional sources, such as private credit, crowdfunding, or fintech lenders |
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Mostly, companies don’t rely on a single option. Instead, they combine multiple sources to support immediate deal financing and long-term stability.
Next, we explore these avenues of business acquisition financing further. Thus, you can choose the structure that fits your strategy.
Debt financing: The classic route
This business acquisition financing involves securing capital from banks or financial institutions. The borrower repays the loan over time through scheduled installments that include principal and interest.
Rather than paying the full purchase price upfront, the acquirer spreads the cost of the deal across future cash flows. The size, structure, and terms of the loan usually depend on the acquirer’s credit profile, the quality of collateral, and the projected performance of the target firm.
Common sources of debt financing in Singapore
- Business acquisition loans from local banks. DBS, OCBC, and UOB offer tailored loans for small and medium-sized enterprises and corporates seeking to make acquisitions. These loans can be structured with repayment schedules and interest rates suited to the borrower’s cash flow.
- Enterprise Financing Scheme (EFS–M&A). Administered by Enterprise Singapore, this scheme supports acquisitions with financing up to S$50 million, often complementing bank loans for SMEs.
- Asset-backed loans and working capital loans. Companies can leverage the target’s assets or expected cash flows to secure additional funding, enabling larger or strategically important acquisitions.
Insight. From 1 April 2025 to 31 March 2030, the Enterprise Financing Scheme will also cover targeted asset acquisitions. This change opens the door for companies that want to acquire specific business assets and are weighing how to get a business acquisition loan to fund the move.
Debt financing delivers a stable and predictable source of capital. However, the deal will support the company’s financial health only with the right loan type, lender, and repayment terms.
Equity and hybrid options
Not every acquisition uses borrowed money. Equity financing uses stock, the company’s capital, or external investors. In particular, organizations may issue new shares, reinvest retained earnings, or partner with private equity or venture capital.
Equity allows a business acquisition company to complete a deal without taking on debt and keeps the balance sheet strong. At the same time, investors share ownership and expect solid returns with a clear exit plan.
Some acquisitions combine debt and equity in hybrid financing:
- Vendor financing. The seller allows the buyer to pay part of the acquisition over time, effectively lending the money. This reduces upfront cash needs while keeping the seller invested in the business’s success.
- Earnouts. Part of the acquisition price depends on future performance. In particular, it may be tied to revenue, profits, and customer retention. The seller benefits only if targets are met.
Both approaches reduce upfront cash and align incentives. However, a strong acquisition business plan remains key. It should demonstrate how the deal fits the company’s strategy, how integration will be executed, and the intended acquisition exit strategy.
Alternative financing: The fintech edge
Not all deals follow traditional debt or equity routes. Alternative acquisition financing leverages the following fintech innovations and non-traditional lenders to provide flexible and accessible capital:
| Alternative financing type | How it works | Key benefits | Considerations |
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| Revenue-based financing | Enables businesses—often SaaS or e-commerce—to repay funds as a percentage of future revenue. |
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| Digital lenders | Platforms such as Funding Societies and Jenfi provide streamlined applications and faster approvals. |
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| Private credit & unitranche loans | Facilities that combine elements of senior and subordinated debt into a single structure. |
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| Crowdfunding platforms | Services like CapBridge allow multiple investors to fund acquisitions in exchange for equity or convertibles. |
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With flexible repayment structures, quicker access to capital, and options linked to performance rather than fixed obligations, alternative financing can enable acquisitions that traditional funding might limit. Still, companies should consider the costs, complexity, and specific terms involved.
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Making strategy part of your financing plan
A successful acquisition starts with strategy. So, clarify the purpose of the acquisition before you choose debt, equity, hybrid, or alternative financing. Are you entering a new market, acquiring technology, or strengthening your operational capacity? Understand the goal first to ensure that your funding supports, but doesn’t dictate the deal.
Next, plan for the acquisition exit strategy. An early focus on exit strategy structures payments, integration schedules, and performance milestones. Whether you intend to hold the asset long-term, spin it off, or prepare for future financing rounds, aligning funding with exit planning mitigates risks and protects your financial position.
Example: Cloud acquisition strategy in tech
A software company acquiring a cloud-based analytics platform must cover upfront purchase costs, integrate subscription billing systems, and migrate customer data to its existing infrastructure. Using flexible financing in this case ensures the organization can pay for ongoing development, retain key technical staff, and scale server capacity without tying up all its cash reserves. This targeted funding approach allows the acquirer to expand cloud offerings efficiently and keep other operations funded.
What are the steps to align financing with the merger and acquisition strategy?
1. Match goals with funding
Link your acquisition objectives to the type of capital that best supports short-term execution and long-term growth.
Map each goal against financing options. If speed is critical, explore private credit or digital lenders. If maintaining balance sheet strength is key, equity may be the better route.
2. Test cash flow against repayment
Make sure projected revenues can support debt service or investor return expectations. Build financial models with conservative, base, and optimistic scenarios. Stress-test repayment capacity against slower growth or rising interest rates to avoid over-leverage.
3. Budget for integration
Account for post-deal expenses such as system upgrades, staff retention, and operational alignment. These are often underestimated but critical for success. List every potential cost and fold it into your financing plan. A detailed budget prevents cash flow strain and ensures resources are available for smooth integration.
4. Think ahead to exit
Clarify the role of the acquisition in your long-term strategy from day one. Define scenarios: full integration, spin-off, IPO, or resale. Build exit planning into board discussions and financing terms so lenders and investors understand how their capital will be repaid.
By connecting financing choices to acquisition strategy and exit planning, companies can pursue growth confidently, balance risk, and make each deal a step toward long-term success.
Don’t forget due diligence
What is due diligence in a business acquisition?
It is a comprehensive review of a target company’s financial, legal, operational, and commercial position before the transaction is completed. Its purpose is to verify the accuracy of information provided, uncover potential risks or liabilities, and confirm that the business justifies its valuation. A thorough due diligence process helps ensure that decision-makers enter the deal with a full understanding of opportunities and risks.
Key areas of due diligence typically include the following:
- Financials: audited statements, cash flow, debt, and revenue quality
- Legal: contracts, compliance issues, ongoing disputes, and intellectual property
- Tax: liabilities, filings, and potential exposure
- Operations: supply chain, systems, and workforce matters
- Commercial: market position, customer concentration, and growth potential
The findings from due diligence feed into your acquisition business plan. Specifically, they help shape realistic projections, identify integration needs, and highlight potential challenges. Thus, a business plan built on solid due diligence guides internal decision-making, reassures lenders and investors, and increases the chances of securing financing.
👁️🗨️Learn more about financial due diligence and tools that streamline the procedure.
How to choose the right financing mix
Once you understand your acquisition goals and have aligned them with your M&A strategy, the next step is to choose how to finance acquisition of a business that best supports your objectives.
The choice often depends on size, growth stage, and risk appetite. To make this clearer, we’ve prepared a table outlining what types of business acquisition financing SMEs and corporates typically consider. Also, you can check the benefits and trade-offs of each option.
| Company type | Typical financing options | Benefits | Trade-offs |
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| SMEs | Bank loans, EFS–M&A, asset-backed loans |
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| Corporates | Internal cash, debt, equity, hybrid structures (mezzanine, vendor financing, earnouts) |
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How to use this table:
- Match your acquisition objectives to the financing options that best support immediate execution and long-term growth
- Evaluate repayment capacity and cash flow against each type of funding
- Consider integration costs, control implications, and your acquisition exit strategy
- Combine options where appropriate to balance speed, risk, and strategic alignment
👁️🗨️ Explore the specifics of buy side vs sell side due diligence.
Conclusion
Business acquisition financing in Singapore offers multiple pathways, including traditional loans, equity, hybrid structures, and fintech solutions. Each option has its advantages and trade-offs, so companies must evaluate which best fits their goals and risk profile.
Programs like the Enterprise Financing Scheme, tax incentives, and the rise of digital lenders provide additional support, making strategic deals more accessible and manageable.
The key takeaway: the right financing works hand in hand with your acquisition strategy. Aligning capital choices with your targets, deal structure, and long-term objectives ensures that business acquisitions drive growth without overstretching resources.