Companies Are Using Debt to Fund Acquisitions

Even as financial markets face uncertainty, companies are actively using debt and loans to fund acquisitions—buying other companies to grow or strengthen their positions. This trend shows that businesses are still willing to take strategic risks when they see clear opportunities.

Why Companies Borrow to Buy Others

Many companies want to expand, consolidate industries, or take advantage of growth opportunities. Instead of waiting to raise money from selling shares, they often borrow through loans or issue bonds. These tools give them cash quickly so they can act on deals that make sense strategically.

For example, Columbus McKinnon recently used acquisition financing to buy another company. Investors were willing to provide the funds because the plan was clear, and the company’s financial situation made the deal manageable. Still, borrowing costs are higher now, and banks are adding stricter conditions to protect themselves from market uncertainty.

High Yield Loans Are Popular, But Risk Is Considered

High yield loans—sometimes called “junk bonds”—are an important source of money for companies making acquisitions. They offer higher returns to investors but carry more risk. Investors are careful, focusing on deals where the company’s cash flow is steady, the business is strong, and the market position is secure.

Companies in stable industries with predictable income have an easier time getting loans. Those in cyclical or heavily indebted industries face more scrutiny. Basically, lenders want to know that the company can pay back the loan even if the economy shifts.

Some Industries Are More Attractive Than Others

Not all sectors are treated the same. Industrial, defense, and technology companies—especially those with reliable earnings—are seeing strong interest from lenders. On the other hand, businesses tied to volatile markets, trade risks, or global conflicts face stricter terms and fewer funding options.

Investors tend to favor companies that can withstand shocks, such as unexpected drops in demand or price swings. This makes sectors with stable cash flows more appealing for borrowing.

Balancing Debt and Equity

Debt isn’t the only way to raise money—companies can also sell shares (equity). But when the stock market isn’t ideal, borrowing through loans or bonds can be faster and more flexible.

Financial experts say that structuring a deal carefully is critical. Companies must balance how much they borrow with their ability to repay it, and include protections for lenders. Done right, debt financing allows businesses to make acquisitions quickly and strategically, without waiting for the stock market to cooperate.

Looking Ahead: Opportunities and Caution

Debt and loans are expected to remain central tools for companies pursuing acquisitions. Businesses with strong plans, stable finances, and careful risk management can likely get the funding they need.

However, there are risks. Companies that borrow too much or ignore market uncertainty may find it harder or more expensive to get money. The key is clear planning, understanding the market, and working with lenders who are confident in the company’s strategy.

In short, borrowing to grow is still common, but it requires careful planning and an eye on both opportunity and risk.