Mezzanine Financing in M&A: Case Study 2025 Deals

Mezzanine financing remains a spine of many M&A capital stacks, typically representing 15-20% of a transaction’s capital structure and serving as the bridge between senior debt and equity. In 2025, large banks and specialty lenders expanded these options, driven by a need to preserve balance sheet capital and provide growth-friendly leverage for middle-market buyouts and bolt-on acquisitions. Goldman Sachs announced a $15 billion mezzanine fund in September 2025 to target private credit opportunities and acquisitions, signaling that capital remains available for sponsor-backed deals, especially when senior debt markets tighten. Centerfield Management’s $257 million fund, Tecum Capital’s $234.6 million SBIC vehicle, Southfield Capital’s $241.7 million fund, Balance Point Capital’s $226.3 million raise, and similar vehicles from other sponsors show a steady flow of junior capital aimed at lower middle-market opportunities. These funds are deployed on deals with target EBITDA ranges typically in the $3-$20 million zone, where mezzanine capital can be sized at roughly 3-3.5x adjusted EBITDA, or used in delayed draw (contingent funding option to draw additional debt later) structures to support future acquisitions.

Mezzanine debt is often unsecured and carries longer maturities with interest-only payments for an initial period. That structure gives sponsors room to manage cash flows post-close while pursuing growth initiatives. Lenders price mezzanine based on adjusted EBITDA multiples rather than collateral value, which means risk pricing hinges on earnings quality, recurring revenue, and the sponsor’s track record. Delayed draw loans are common, allowing an initial close with the option to draw additional funds if and when acquisition opportunities arise. For example, a $25 million initial loan could be paired with a $25 million delayed draw, giving the sponsor flexibility to fund bolt-ons without re-tranching senior debt.

The market backdrop in 2025 supports this approach. Global M&A volumes were down about 9% in the first half of 2025 versus the first half of 2024, yet deal values climbed roughly 15% over that period, indicating buyers are willing to pay for strategic acceleration, often funded by structured credit.

Mega-deals in the first half of 2025 illustrate the scale of financing needs: Google’s proposed $32 billion acquisition of Wiz and Constellation Energy’s $26.6 billion purchase of Calpine. Global Payments’ $24.25 billion acquisition of Worldpay also underscores the need for layered financing that can include mezzanine components, preferred equity, and complex debt instruments to manage cost of capital and execution risk.

Case study: mezzanine-driven structures in practice

Case study: a hypothetical but representative mezzanine-driven structure for a tech-enabled services company and a traditional industrial consolidator illustrate how this works in practice. In a Google-Wiz type scenario, a sponsor-backed acquisition could involve senior bank debt to cover the core consideration, a mezzanine layer sized at 3-3.5x adjusted EBITDA for Wiz’s earnings base, and a delayed draw facility to fund potential follow-on acquisitions within Wiz’s platform strategy. If Wiz generates $300 million in adjusted EBITDA, a mezzanine tranche of about $900 million to $1.05 billion could be used to bridge the equity gap, with the remaining purchase price financed through equity and senior debt. A 3-3.5x EBITDA multiple aligns with market practice, ensuring the mezzanine is sized to fund growth without over-leveraging the platform.

In a more traditional lower-middle-market example, consider a regional industrial consolidator with $15 million EBITDA. A mezzanine facility sized at 3.0-3.5x would be $45-$52.5 million, often paired with a $20-$30 million delayed draw for bolt-ons. That combination supports near-term growth while preserving flexibility for add-on acquisitions over the next 12-36 months. Sponsors use these structures to preserve cash flow during integration, enable faster scale, and manage dilution.

From the lender side: practical levers and evaluation

From the lender side, funds like Centerfield, Tecum, Southfield, and Balance Point emphasize a few practical levers. They focus on EBITDA quality, recurring revenue, and the sponsor’s operating plan. They rely on delayed draws to fund future acquisitions and growth initiatives.

They evaluate deal risk using multiples of adjusted EBITDA rather than collateral value, which means earnouts, earnouts-like structures, and management incentives can be clave to closing. In today’s market, the ability to pair mezzanine with secured or unsecured tranches, plus cross-border or cross-asset diversification, is a differentiator when bidding on competitive processes.

Practical takeaways for practitioners

For practitioners, there are concrete takeaways. First, expect mezzanine to be a planning constant in deal structures, especially when premium valuations limit senior debt headroom. Second, anticipate a rising role for delayed draw features, as buyers want optionality to pursue accretive acquisitions after close. Third, remember that a sizable portion of the total capital stack will come from non-dilutive or minimally dilutive sources; mezzanine and SBIC funds are increasingly common, with new vehicles launched in 2025 by major houses and specialist sponsors alike. The mega-deals of 2025 show how financing complexity has become the norm rather than the exception.

Real-world data points reinforce these patterns. The 2025 fundraising pace for mezzanine-focused vehicles remains strong: Goldman Sachs’s $15 billion fund, Centerfield’s $257 million, Tecum’s $234.6 million SBIC, Southfield’s $241.7 million, and Balance Point’s $226.3 million all reflect sustained demand for junior capital.

The broader market context, 9% decline in volume and 15% higher deal values in H1 2025, suggests buyers are selective, but once they push forward, they deploy sizable capital stacks that include mezzanine, originate more complex financing mixes, and rely on senior lenders’ capacity to take on leverage. In this environment, mezzanine debt remains a practical tool for achieving strategic control over cap tables while preserving sponsor flexibility.

Practical notes

• Use 3-3.5x adjusted EBITDA as a baseline for mezzanine sizing (but stress test scenarios with modest EBITDA declines or revenue mix changes).
• Plan for a clear path to cash flow coverage for interest-only periods and define exit mechanics early.
• In the lower middle market, target deals with EBITDA in the $3-$20 million range, where mezzanine adds meaningful growth capital without over-constraining equity returns.
• Align the financing plan with integration milestones and potential bolt-ons to maximize post-close value.

If you want more on mezzanine mechanics, lender perspectives, and case-based modeling, keep an eye on Matactic for deeper dives into debt financing, structure optimization, and real-world deal case studies. Not gonna lie, these concepts stay relevant across sectors, and they’re central to closing value in acquisitions. For more terms and practical guidance, check the Matactic glossary and sign up for our free M&A course. Peace out.