425: Runway Growth Finance to Acquire SWK Holdings in Three-Step Merger

Sentiment:

Merger Announcement 10 October 2025 5:22 PM

📋All filings for Runway Growth Finance CORP

Runway Growth Finance Corp. has entered into a definitive agreement to acquire SWK Holdings Corporation through a three-step merger, offering SWK shareholders a choice of stock or cash consideration plus a guaranteed cash payment.

Delay expectedThe closing of the Mergers is subject to the satisfaction or waiver of certain customary closing conditions, including the effectiveness of the Registration Statement and approval of SWK's stockholders, which could cause delays.The Merger Agreement specifies that RWAY and SWK will update and redeliver NAV calculations if the closing is 'subsequently materially delayed' or if there is a 'material change' to the calculation between the Determination Date and closing.The 'Forward Looking Statements' section explicitly lists 'the ability of the parties to consummate the Mergers on the expected timeline, or at all' as a risk.

Capital raiseThe merger consideration includes the issuance of newly issued shares of common stock of RWAY (Parent Common Stock) to SWK stockholders who elect to receive stock, which constitutes a capital raise for RWAY.The total stock consideration is capped at the lesser of $75,500,000 divided by the Parent Per Share NAV or 19.9% of RWAY's outstanding common stock, indicating a significant equity component.

Summary

Runway Growth Finance Corp. (RWAY) will acquire SWK Holdings Corporation (SWK) through a three-step merger process, with RWAY as the ultimate surviving corporation.
SWK stockholders will receive, for each share, either newly issued RWAY common stock (Per Share Stock Consideration) or cash equal to SWK's Net Asset Value per share (Per Share Cash Consideration).
Additionally, SWK stockholders will receive a Per Share Guaranteed Cash Payment from Runway Growth Capital LLC (the Adviser), calculated as $9,000,000 divided by the number of outstanding SWK common shares.
The Exchange Ratio for stock consideration will be determined by dividing SWK's Net Asset Value per share by RWAY's Net Asset Value per share, both calculated two days prior to the merger's effective time.
The total stock consideration is capped at the lesser of $75,500,000 divided by RWAY's Per Share NAV or 19.9% of RWAY's outstanding common stock.
Double Black Diamond Offshore Ltd., holding approximately 69.9% of SWK's common stock as of October 9, 2025, has agreed to vote in favor of the merger.

Sentiment

Score: 8

Explanation: The definitive merger agreement, coupled with unanimous board approvals and a significant shareholder's commitment to vote in favor, indicates a high probability of the transaction closing. The structure offers flexibility to SWK shareholders and includes a guaranteed cash component from the adviser, indicating a well-structured and mutually beneficial strategic move.

Positives

SWK shareholders receive a guaranteed cash payment of $9,000,000 in aggregate from the Adviser, in addition to stock or cash consideration.
The Key Stockholder, owning approximately 69.9% of SWK, has committed to vote in favor of the merger, significantly increasing the likelihood of shareholder approval.
The merger provides SWK shareholders with flexibility to elect either RWAY common stock or cash, catering to different investment preferences.
The transaction is expected to create synergies and savings for the combined entity.
RWAY will cover all transfer, stamp, and documentary taxes or fees related to the transaction.

Negatives

SWK shareholders' election for stock or cash consideration is subject to proration and limitations, meaning they may not receive their preferred form of consideration.
SWK is required to terminate its employees and 401(k) plans prior to the Effective Time, which could lead to employee disruption.
SWK's obligation to consummate the merger is conditional on a third-party valuation of its portfolio assets not being more than $5,000,000 less than its good faith carrying value, introducing a potential hurdle.
The Key Stockholder Agreement includes restrictions on 'stockholder activism' for the Key Stockholder regarding RWAY post-merger, which could limit future shareholder influence.

Risks

Uncertainties associated with the ability of the parties to consummate the Mergers on the expected timeline, or at all.
Risks related to the expected synergies and savings associated with the Mergers not being fully realized.
The ability to realize the anticipated benefits of the Mergers, including the expected elimination of certain expenses and costs.
The percentage of SWK stockholders voting in favor of the applicable proposal.
The possibility that competing offers or acquisition proposals will be made.
The possibility that any or all of the various conditions to the consummation of the Mergers may not be satisfied or waived.
Risks related to diverting management's attention from ongoing business operations.
Uncertainties regarding the combined company's plans, expectations, objectives, and intentions as a result of the Mergers.
Any potential termination of the Merger Agreement.
Uncertainties regarding the future operating results and net investment income projections of RWAY, SWK, or the combined company.
The ability of the Adviser and its affiliates to attract and retain highly talented professionals.
The business prospects of RWAY, SWK, or the combined company, and the prospects of their portfolio companies.
The impact of the investments that RWAY, SWK, or the combined company expect to make.
The expected financings and investments and additional leverage that RWAY, SWK, or the combined company may seek to incur in the future.
The adequacy of the cash resources and working capital of RWAY, SWK, or the combined company.
The timing of cash flows, if any, from the operations of the portfolio companies.
The risk that stockholder litigation in connection with the Mergers may result in significant costs of defense and liability.
Future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities).

Future Outlook

The merger is anticipated to generate synergies and cost savings, leading to a combined company with enhanced business prospects and the ability to achieve portfolio company objectives. The parties expect to make future financings and investments, potentially incurring additional leverage. The success hinges on the timely consummation of the merger, realization of anticipated benefits, and the ability to attract and retain talented professionals.

Management Comments

The respective board of directors of each of RWAY and SWK has approved, among other things, the Merger Agreement and the transactions contemplated thereby.
The Company Board has resolved to recommend that the Company’s stockholders approve and adopt this Agreement.
The Parent Board has, by unanimous vote of all directors, determined that this Agreement and the transactions contemplated hereby, including the Mergers and the issuance of shares of Parent Common Stock in connection therewith, are advisable, fair to and in the best interest of Parent’s stockholders and approved and adopted this Agreement and the transactions contemplated by this Agreement.

Industry Context

This merger represents a consolidation within the specialty finance or business development company (BDC) sector. RWAY, as a BDC, likely seeks to expand its asset base, achieve economies of scale, and potentially diversify its investment portfolio by acquiring SWK Holdings, which appears to have a focus on healthcare-related finance. The strategic rationale often includes increasing net investment income, improving operational efficiency, and enhancing shareholder value through a larger, more robust platform. The involvement of an external adviser (Runway Growth Capital LLC) is typical for BDCs, and the guaranteed cash payment from the adviser suggests a commitment to the transaction's success and potentially a way to sweeten the deal for SWK shareholders.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Indemnification and Exculpation Rights	All rights to exculpation and indemnification for acts or omissions occurring at or prior to the Effective Time for current or former directors, officers, managers, or employees of SWK and its subsidiaries (D&O Indemnified Parties) will survive the Mergers.	Effective Time	Ensures continued protection for past and present SWK D&O Indemnified Parties.
Organizational Document Provisions	RWAY will cause the surviving corporation's organizational documents to contain indemnification, expense advancement, and liability limitation provisions no less favorable than SWK's current documents.	Effective Time	Maintains a consistent level of protection for D&O Indemnified Parties within the combined entity.
D&O Insurance Policy	SWK will purchase and fully prepay a six-year tail insurance policy for directors and officers liability coverage for D&O Indemnified Parties, effective as of the closing.	Closing Date	Provides long-term insurance coverage for D&O Indemnified Parties for actions taken prior to the merger.
Stockholder Activism Restrictions	The Key Stockholder Agreement includes provisions prohibiting Double Black Diamond Offshore Ltd. from engaging in certain 'stockholder activism' activities with respect to RWAY post-merger, such as proxy solicitations, seeking to terminate the adviser, or nominating board candidates, until their beneficial ownership falls below 3%.	Post-Closing until Fall-Away Date	Limits potential shareholder activism from a major former SWK shareholder in the combined entity, potentially providing stability for RWAY's management and board.

Legal Proceedings

The 'Forward Looking Statements' section mentions the risk that stockholder litigation in connection with the Mergers may result in significant costs of defense and liability.
The parties to the agreement will reasonably cooperate and consult in the defense and settlement of any Stockholder Litigation and will not settle without the other party's prior written consent.

Related Party Transactions

A Key Stockholder Agreement was entered into between RWAY and Double Black Diamond Offshore Ltd. (the Key Stockholder), which owns approximately 69.9% of SWK's outstanding common stock. This agreement commits the Key Stockholder to vote in favor of the merger and imposes certain post-merger 'stockholder activism' restrictions on them regarding RWAY.

Stakeholder Impact

SWK Shareholders: Will receive consideration in RWAY stock, cash, or a combination, plus a guaranteed cash payment. Their approval is required for the merger.
RWAY Shareholders: Will experience dilution from new share issuance but are expected to benefit from synergies and an expanded platform. No vote is required for RWAY shareholders.
SWK Employees: Employment will be terminated prior to the Effective Time, with some potentially becoming 'Continuing Employees' of the combined entity with comparable benefits for 12 months.
SWK Management/Directors: Indemnification and D&O insurance rights are preserved for six years post-merger.
Creditors: SWK's existing credit agreement will be paid off by RWAY. The Existing Notes Indenture will be amended.
Adviser (Runway Growth Capital LLC): Will provide a $9,000,000 cash payment to SWK shareholders. The Key Stockholder has agreed not to seek termination or replacement of the Adviser post-merger.

Next Steps

RWAY will file a registration statement on Form N-14 with the SEC, which will contain a preliminary proxy statement of SWK and a preliminary prospectus of RWAY.
SWK will mail a definitive proxy statement/prospectus to its stockholders after the Form N-14 is declared effective.
SWK will duly call, give notice of, convene, and hold a special meeting of its stockholders to consider the adoption of the Merger Agreement and approval of the Mergers.
The parties will work to satisfy customary closing conditions, including regulatory approvals and the expiration/termination of the HSR Act waiting period.
SWK will prepare and deliver audited consolidated financial statements for the year ended December 31, 2025, prior to the Effective Time.
SWK will deliver a payoff letter for its existing credit agreement, which RWAY will pay off at closing.
RWAY will use reasonable best efforts to list the newly issued common stock on NASDAQ.
The closing of the First Merger is targeted for no later than the third business day after conditions are met, with a goal of occurring on or prior to December 31, 2025.

Key Dates

Date	Description
April 8, 2016	Date of original Rights Agreement between SWK and Computershare Trust Company, N.A.
April 8, 2019	Amendment No. 1 to Rights Agreement.
February 23, 2021	Amendment No. 2 to Rights Agreement.
March 31, 2022	Amendment No. 3 to Rights Agreement.
May 30, 2022	Rights Agreement expired.
June 28, 2023	Date of Existing Credit Agreement.
October 3, 2023	Date of Existing Notes Indenture and First Supplemental Indenture.
August 26, 2024	Date of Confidentiality Agreement between BC Partners Advisors L.P. and SWK.
December 31, 2023	Baseline for compliance with laws, financial statements, and certain changes/events.
December 31, 2024	Baseline for absence of certain changes/events and undisclosed liabilities for Parent.
April 29, 2025	RWAY's proxy statement for 2025 Annual Meeting of Stockholders filed.
April 30, 2025	RWAY's proxy statement revised; SWK's proxy statement for 2025 Annual Meeting of Stockholders filed.
September 30, 2025	Date for initial determination of Asset Valuation Range for Company Portfolio Assets.
October 7, 2025	Close of business date for outstanding common stock counts for SWK and RWAY.
October 9, 2025	Merger Agreement and Key Stockholder Agreement entered into.
October 10, 2025	Date of Report (Form 8-K filing).
December 31, 2025	Target date for Closing of the First Merger.
April 7, 2026	Termination Date for the Merger Agreement if not consummated.

Recommendation

hold

The definitive merger agreement, coupled with unanimous board approvals and a significant shareholder's commitment to vote in favor, indicates a high probability of the transaction closing. For existing SWK shareholders, holding shares is advisable to receive the agreed-upon merger consideration. For potential investors, the strategic rationale of the merger and the terms of the deal should be carefully evaluated, but the immediate action for current SWK holders is to hold. For RWAY, the acquisition is a strategic expansion, and investors should assess the long-term value creation potential of the combined entity.

Keywords

Merger, Acquisition, Runway Growth Finance Corp., SWK Holdings Corporation, RWAY, SWK, Business Development Company, BDC, Financial Services, Investment Company Act, Net Asset Value, Shareholder Agreement, Corporate Governance, Risk Management, Financial Reporting

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