Ross Marshall, Dunedin’s CEO, says, ‘We started to underwrite the debt on deals in 2007 and have done so on the last four buyouts we financed.’

Marshall adds that the ‘debt bridging model’ brings certainty to the vendor and management team that a buy-out will happen in a financing environment which is still difficult post-credit crunch. However, it relies on a private equity house being confident that it can sell the debt on to a bank post-deal, and carrying out all the appropriate due diligence on its own.

Dunedin has sold on the debt for three of the four deals it has financed in this way. In global navigation aids company Fernau Avionics, debt was sold on to Lloyds Bank after the buy-out. Senior debt was provided by Allied Irish Bank to employee benefits business Enrich, while Royal Bank of Scotland financed the Hawksford buy-out post-deal.

In the case of engineering company Formaplex, Dunedin reveals that it ‘chose to retain the debt… in order to give the business flexibility to grow by acquisition’.