Equity Kicker
A provision that provides additional equity upside to lenders or investors as an incentive, often used in mezzanine financing related to M&A.
Implications
An additional incentive provided to lenders or investors, often in the form of equity or equity-like instruments, to enhance the overall return on an investment, commonly used in private equity or venture capital deals to align interests and increase potential upside.
Example
Example: A private equity firm includes an equity kicker in a mezzanine financing deal, giving lenders the option to convert debt into equity if the company meets certain performance targets, offering additional upside potential.
Related Terms
Different from straight equity investments, an equity kicker is usually tied to a debt instrument, providing both downside protection and potential equity upside.
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