mezzanine financing, mezzanine capital
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Individual financing solutions for medium-sized businesses: Silent partnerships, subordinated loans and profit participation certificates
Today, there are a variety of tailor-made financing options available to medium-sized companies that are specifically tailored to their individual needs and growth prospects. Common instruments include silent partnerships, subordinated loans, profit participation certificates and profit-participating loans. These forms of mezzanine financing combine elements of equity and debt, making them a flexible and attractive option for raising capital without placing a heavy burden on company management or equity structure.
Mezzanine capital is particularly suitable for companies that need additional financing but do not want to use traditional bank loans or whose equity ratio would be too heavily burdened by traditional financing. The exact tax and accounting classification of these financing instruments depends on the specific legal structure. Depending on the structure, these forms of capital can have different effects on a company's balance sheet and tax burden. It is therefore crucial to choose financing solutions that suit the company's strategy and the legal framework.
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3Legal expertise in the field of mezzanine capital
Our law firm offers comprehensive advice and support for companies and investors in all areas of corporate financing. In the specific area of mezzanine financing, we focus on a variety of legal aspects. This includes the legal design of instruments such as silent partnerships, profit participation certificates, subordinated loans and profit-participating loans. In addition, we offer tax-optimized structuring of these forms of financing in order to meet the individual needs of our clients.
Our expertise also includes regulatory advice, particularly with regard to licensing and prospectus obligations under the German Banking Act (KWG), the German Investment Code (KAGB), the German Investment Act (VermAnlG) and the German Securities Prospectus Act (WpPG) and other relevant regulations. We also support the legal termination or cancellation of mezzanine financing and represent our clients both out of court and in court in disputes between capital providers and capital borrowers.
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Mezzanine financing players and their expectations
Mezzanine financing is often mentioned in the context of corporate financing for medium-sized companies, but its flexibility and versatility also make it suitable for companies of all sizes - from start-ups to large multinational corporations. Mezzanine capital serves as a supplement to both equity and debt and is a valuable tool for optimizing a company's financing structure. The rights of investors with regard to information and participation can be individually adapted within the framework of the financing in order to meet the respective interests and the specific situation.
The capital providers for mezzanine financing are both institutional investors such as banks, venture capital firms and insurance companies as well as private investors. In return for their commitment, they expect a risk-adequate return, which tends to be higher the closer the mezzanine capital is to traditional equity.
Forms of mezzanine financing
In the area of corporate finance, various forms of mezzanine capital have developed, which can basically be divided into two main categories: equity-like instruments (equity mezzanine capital) and debt-like instruments (debt mezzanine capital).
Equity Mezzanine Capital is viewed as equity both economically and in the balance sheet, but can be treated as debt for tax purposes under certain circumstances. It is classified as equity based on a performance-related remuneration component, the subordination of the claim and the long-term orientation of the investment. Common forms of equity mezzanine capital include profit participation certificates and atypical silent partnerships.
In contrast, Debt Mezzanine Capital often has characteristics similar to equity, but is classified as debt capital in the balance sheet. Depending on the structure, it can also be treated as debt capital for tax purposes. Typical forms of debt mezzanine capital include subordinated loans and silent partnerships.
However, there are financing instruments in the area of mezzanine financing that cannot be clearly classified into these categories. These include hybrid forms such as warrant bonds and convertible bonds.
We support you with your mezzanine financing
Silent partnerships, profit participation rights, profit-participating loans, subordinated loans and other forms of mezzanine financing require individual legal and tax structures. Lawyers and tax advisors who advise companies or investors in this area should not only have in-depth knowledge of corporate and tax law, but also have economic expertise. This is the only way to understand the specific needs of the client and take them into account in the structure.
In addition, regulatory issues, such as licensing or prospectus requirements, play a central role. In these areas, we examine the relevant requirements and, depending on the individual case, provide support in either meeting the regulatory requirements or avoiding potential risks.
In our firm, we offer holistic support that includes advice on commercial and tax law as well as regulatory law. This integrated advice has proven to be particularly effective.
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