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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Equity contribution (acquisition finance)

What is the equity contribution in an acquisition, and what counts as equity?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

The equity contribution is the share of an acquisition's total cost, price plus transaction costs, that the buyer funds with its own money rather than with acquisition debt. On a US$50m purchase with US$2m of costs, senior debt of US$30m leaves an equity contribution of US$22m, about 42%. A lender reads what the equity is made of as closely as its size: cash from the buyer counts, shareholder loans usually count only if fully subordinated, and a vendor loan, price the seller has agreed to wait for, is counted with the equity by some lenders when it is deeply subordinated and treated as debt by others.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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