Vendor Take-Backs: A Useful Tool For Financing M&A Transactions

A vendor take-back (VTB) (or "vendor financing") is a potential supplementary method of financing an acquisition transaction. It is often documented by a vendor take back note or promissory note. A VTB may be used as a type of non-consideration in conjunction with other forms of financing in order to facilitate an acquisition.

In a VTB financing arrangement, the purchaser satisfies a portion of the purchase price through financing, typically by issuing a note to the vendor. Under this arrangement, the vendor effectively loans a portion of the purchase price to the purchaser. VTBs can be used by parties to a transaction to address any shortfall between the purchase price and available cash flows. In effect, this financing tool results in the buyer purchasing the subject assets of the sale over the course of a period of time, by way of periodic payments to the vendor.