There are literally hundreds of sources of financing for a company that wishes to buy (or be bought by) another company. Here are some of the most common:

• Asset-based lenders, which make loans based on a company’s hard collateral, such as real estate.
• Business development companies (BDCs), which are closed-end investment funds that invest in small private companies and distressed firms. These are different from usual investment companies in that nonaccredited investors are allowed to buy into the fund. BDCs may be publicly traded and thus subject to SEC oversight.
• Commercial and community banks, which make term loans or offer credit cards, a source of funding for very small companies.
• Commercial finance companies, which make term loans (but unlike banks cannot take deposits).
• Employees, who can buy a company’s stock through an employee stock ownership plan (a special type of private stock offering) or through equity grants, employee ownership trusts, or worker cooperatives.
• Family offices, which in recent years have joined other nontraditional investors as a source of capital for M&A deals.
• Insurance companies, which are permitted to make loans collateralized by insurance policies.
• Investment banks, which serve as underwriters by working with brokerage firms as buyers and resellers of issues of equity and debt. They, in turn, sell to institutional investors such as pension funds, which buy stocks and bonds for their beneficiaries, and investment companies.
• Investment companies, such as mutual funds, which buy stock in publicly traded companies to create investment portfolios for customers.
• Merchant banks, which are like investment banks, but which invest their own money as principals in a transaction. They do private placements of equity, often taking partial ownership in companies. They also offer trade financing services such as letters of credit.
• Private investment firms, such as private equity firms or venture capital firms, which buy debt or equity securities of privately held companies as an investment. They are often structured as funds. (See Twelve Types of Funds.)
• Sovereign wealth funds, through which nations or other jurisdictions can make equity investments—generally with the goal of strong returns for beneficiaries
• Special purpose acquisition companies (SPACs), also called blank check companies, through which original sponsors and other investors use a shell public company (the pre-SPAC) to acquire one or more existing companies and then be a public company (post-SPAC). The SPAC has two years to make an acquisition; if it does not it dissolves and returns funds to investors.