Add-On Acquisition
Private Credit glossary · Market, Sourcing & Sponsor Dynamics
Definition
A bolt-on acquisition by a sponsor's existing portfolio company — typically funded via a delayed-draw tranche or the accordion (incremental facility) under the existing credit agreement, subject to pro forma covenant compliance. Lender benefits include a larger and more diversified borrower, often-lower pro forma leverage, and incremental origination fees; the structure is preferred over a full refinancing because it preserves the existing covenant package.
Add-On Acquisition in plain English
A private-equity firm (the "sponsor") often owns a company and wants to grow it by buying up smaller competitors and bolting them on — that's an add-on acquisition. Instead of arranging a brand-new loan every time, they tap the extra borrowing room already written into their existing loan (the accordion, or a pre-committed "delayed-draw" chunk they can pull down later). For the lender this is usually good news: the company gets bigger and more spread-out (less risky), sometimes even less indebted relative to its earnings, and the lender collects fresh fees — all while keeping the same rulebook they already negotiated, which they'd rather not reopen.
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