Hedge Fund Glossary

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Financing Out

a Condition Precedent in the merger or Stock Purchase Agreement that makes the acquisition transaction subject to financing. The consequence of a Financing Out is that the acquiror does not have to consummate the acquisition if the loan commitments (as set forth in the Commitment Letter) do not fund. The Financing Out is a big deal and is hugely important to the overall structure of the financed acquisition transaction because a Financing Out effectively incorporates into the acquisition agreement all the Conditions Precedent in the Commitment Letter. Without a Financing Out, the acquiror will insist on fewer Conditions Precedent in the Commitment Letter because the acquiror knows it is contractually obligated to consummate the purchase whether or not the financing is still available on the Closing Date.

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