What Are Debt Covenants? M&A Banking Due Diligence Overview

We interviewed Kelly Lamirand, Senior Vice President at KeyBank to discuss what business owners should expect from Senior Lender M&A due diligence. Among other things, Kelly discusses:

• What information do senior lenders require when performing bank due diligence in an M&A transaction?
• Why do banks conduct due diligence?
• Common lending terms including revolver availability, cashflow recapture, and airball
• Discussion of the "5 C's of Credit," Character, Capacity, Condition, Collateral, Capital
•  What debt levels are senior lenders comfortable with from a total debt perspective and a senior debt perspective?
• What factors into the interest rate senior lenders charge? Does a bank's relationship with the private equity firm factor into pricing?
• What are debt covenants and what purpose do they serve?
• How do banks view growth capital expenditures vs. maintenance capital expenditures?