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Insights Strategically designing refinancing – How mid-cap companies can convince with refinancing due diligence and a clear credit story

Strategically designing refinancing – How mid-cap companies can convince with refinancing due diligence and a clear credit story

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​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​published on 8 April 2025 | reading time approx. 5 minutes​
In times of volatile capital markets, rising interest rates and growing demands for transparency, the topic of refinancing is becoming increasingly important for medium-sized companies, especially in the context of a prolonged recession, in which revenues and liquidity often turn out to be lower than usual due to external factors. At the same time, many companies will have to renew existing financing in the coming years – often under different conditions than at the time of the original contract.
 
There are many reasons for refinancing: often it is done to achieve better financing conditions due to an improved credit rating. It can also be done to provide additional capital for the operating business – for example, to finance working capital – or for investments in growth, M&A or innovation.
A key success factor: the refinancing due diligence – a structured analytical process to identify and address financing capacity, capital structure and potential risk factors at an early stage. 

Regardless of the specific reason, the central objective of any refinancing is to maximize the probability of successfully raising capital at attractive conditions. The early involvement of an experienced transaction advisor is crucial – their expertise adds real value in all phases of the process.
The refinancing due diligence is a structured analysis process that is usually carried out in ad-vance of a pending refinancing or debt restructuring. The aim is to realistically assess the company's ability to obtain financing from the perspective of potential lenders and to identify possible weaknesses at an early stage.

A typical refinancing process for a company goes through the following phases:​

Assessment


Analysis of internal factors (e.g. earnings, liquidity, investment plans) and external factors (including credit rating, interest rate trends, market changes) to determine the refinancing requirement and the optimal structure.

Preparation


Selecting experienced corporate finance and transaction advisors, compiling and analyzing the relevant financial and corporate data, developing a convincing credit story and a resilient business case. The priorities for the due diligence are also defined in this phase.

Implementation

​

Structured approach to potential financing partners, provision of relevant documents (business plan, due diligence reports, further analyses) and conducting Q&A sessions with interested parties.

​​Closing


Negotiation and conclusion of the refinancing and disbursement of funds.

​The result of the support provided by a transaction consultant is an objective analysis suitable for banks or investors – comparable to a seller information document in an M&A context – and provides the basis for transparent and targeted discussions with financing partners and, ultimately, the closing of the financing.​

Why is refinancing due diligence particularly relevant for medium-sized compa-nies – and what role does a transaction consultant play?​

German mid-cap companies are increasingly confronted with the necessity to adapt existing financing structures to new market conditions – for example, as a result of expiring fixed interest rates, changed balance sheet ratios or growth-related capital requirements. At the same time, potential financing partners are placing increasing demands on data quality, transparency and reliable planning.

A key success factor here is the involvement of an experienced transaction advisor who can guide the company through all phases of the process and deliver real added value, especially with regard to strong positioning with investors:

­Structured preparation & efficiency

Even in the early stages, the consultant provides support in compiling, preparing and validating financial and operational data from various areas of the company. Discrepancies between financial and non-financial data sources can lead to implausible planning assumptions. A transaction consultant helps to ensure consistency, increases process efficiency and lays the foundation for a professional approach to potential financing partners.
 

­Development of a convincing credit story

The transaction consultant not only analyzes the figures, but also helps to develop a plausible, data-based argument for the refinancing. In doing so, key KPIs such as adjusted EBITDA, free cash flow and working capital are critically scrutinized and prepared in a targeted manner for investors and banks. The credit story must present the reason for the refinancing in a comprehensible way – and justify why financing is justified from the perspective of potential lenders.

­Smooth process & anticipation of questions

During the implementation phase, the consultant supports communication with investors, particularly in Q&A sessions. Thanks to their experience on both sides of transactions, they can anticipate relevant topics at an early stage and prepare well-founded answers – an important basis for successful negotiations. ​

­Long-term learning effect for the company

Even after the refinancing has been completed, companies benefit from the structured approach. They gain a deeper understanding of the key figures, information and processes which are crucial for financing partners – and can thus design future financing initiatives in a more targeted, efficient and cost-effective manner. Effective monitoring of internal and external factors (including liquidity KPIs) is crucial to enable a timely response and avoid critical situations.​

​​Conclusion

​Refinancing due diligence is not a compulsory exercise, but a strategic tool for actively shaping financing options. Particularly in the current environment, medium-sized companies should not wait and see, but proactively analyze: How financially strong is my company really – from a third-party perspective? The most important goal here is to increase the probability of obtain​ing refinancing at reasonable conditions.​

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