425: Runway Growth to Acquire SWK Holdings in Strategic Merger

Runway Growth Finance Corp. announced a definitive merger agreement to acquire SWK Holdings Corporation, expanding its healthcare and life sciences portfolio and enhancing its financial profile.

Summary

• Runway Growth Finance Corp. (RWAY) has entered into a definitive merger agreement to acquire SWK Holdings Corporation (SWK), a life science focused specialty finance company.
• The transaction is structured as a multi-step merger, with SWK becoming a wholly-owned subsidiary of Runway Growth.
• The estimated purchase price is approximately $220 million, based on SWK's June 30, 2025 financials and estimated transaction expenses.
• Consideration includes a fixed stock component of $75.5 million in Runway Growth shares and approximately $145 million in cash.
• Runway Growth Capital LLC, Runway Growth's external investment adviser, will contribute an additional $9 million in cash for distribution to SWK stockholders.
• SWK's portfolio comprises 22 companies, with an approximate fair value of $242 million as of August 15, 2025.
• The transaction is expected to close in late 2025 or the first quarter of 2026, subject to SWK shareholder and regulatory approvals, and other customary closing conditions.

Sentiment

Score: 9

Explanation: The filing announces a strategic acquisition expected to significantly enhance Runway Growth's financial profile, diversify its portfolio into high-growth sectors, and deliver NII accretion, indicating strong positive sentiment and clear strategic benefits.

Positives

• Meaningfully advances the strategy to diversify and optimize the portfolio by adding high-quality investments in healthcare and life sciences.
• Enhances earnings power, more than offsetting anticipated loan repayments, and is expected to deliver mid-single-digit Net Investment Income (NII) accretion.
• Reinforces portfolio strength and is expected to generate long-term value for shareholders through disciplined growth and venture debt investing.
• Expands the balance sheet to $1.3 billion in total assets pro forma for the SWK acquisition.
• Increases healthcare investments to approximately 31% of the portfolio from 14% as of June 30, 2025.
• Enhances strong portfolio metrics through high-quality investments and a meaningful reduction in average loan size.
• Offers a repeatable blueprint for future non-dilutive acquisitions in the venture and growth investment ecosystem.
• Bolstered by the support of the BC Partners Credit platform for both organic and inorganic strategies.
• Expected to drive improvements in dividend coverage and Return on Equity (ROE), and expand the pro-forma leverage ratio.
• Improvements in the financial profile will increase nominal leverage capacity and support continued risk-adjusted returns.
• Broadens the shareholder base and increases the trading liquidity of common shares through the issuance of $75.5 million in Runway Growth shares to SWK's shareholders.

Risks

• Uncertainties associated with the ability of the parties to consummate the merger on the expected timeline, or at all.
• Uncertainties regarding the expected synergies and savings associated with the merger.
• The ability to realize the anticipated benefits of the merger, including the expected elimination of certain expenses and costs.
• The impact of the merger on the depth of trading in Runway's shares of common stock post-closing.
• The possibility that any or all of the various conditions to the consummation of the merger may not be satisfied or waived.
• Risks related to diverting management's attention from ongoing business operations.
• The potential termination of the merger agreement.
• The ability of Runway Growth Capital LLC to implement its future plans with respect to the combined company.
• The ability of Runway Growth Capital LLC and its affiliates to attract and retain highly talented professionals.
• The business prospects of the combined company and the prospects of its portfolio companies.
• The expected financings and investments and additional leverage that the combined company may seek to incur in the future.
• The adequacy of the cash resources and working capital of the combined company.
• The risk that stockholder litigation in connection with the merger may result in significant costs of defense and liability.
• Risks associated with development programs for medical products, including the high degree of risk in research and development and the small number of programs resulting in commercialization.

Future Outlook

The acquisition is expected to generate mid-single-digit run-rate Net Investment Income (NII) accretion during the first full quarter following the transaction close, as well as drive improvements in dividend coverage and Return on Equity (ROE), and expand Runway Growth's pro-forma leverage ratio. The company plans to pursue growth through both organic and inorganic strategies as a permanent capital vehicle backed by the $10 billion BC Partners Credit platform.

Management Comments

• "This transaction meaningfully advances our strategy to diversify and optimize our portfolio by adding SWK’s high-quality investments in the key sectors of healthcare and life sciences." David Spreng, Founder and CEO of Runway Growth.
• "At the same time, we are enhancing our earnings power, more than offsetting the anticipated loan repayments we previously signaled, and we expect to deliver mid-single-digit NII accretion." David Spreng.
• "This transaction reinforces the strength of Runway Growth’s portfolio as we work to generate long-term value for our shareholders through disciplined growth and venture debt investing with a focus on excellent credit quality in the sectors we know best." David Spreng.
• "Looking ahead, and with the full support of BC Partners Advisors L.P., we are pursuing growth through both organic and inorganic strategies as a permanent capital vehicle backed by the $10 billion BC Partners Credit platform." David Spreng.
• "We are doing all of this while growing our shareholder base, improving our existing robust portfolio metrics and increasing our total assets to $1.3 billion pro forma with the SWK merger transaction." David Spreng.

Industry Context

The acquisition positions Runway Growth to capitalize on the large and growing healthcare and life sciences market, a trend seen across the specialty finance and venture debt sectors as investors seek stable, high-growth opportunities. This move reflects a broader industry strategy of portfolio diversification and scale enhancement through strategic mergers and acquisitions, particularly in specialized, less-dilutive financing solutions for commercial-stage companies.

Corporate Governance

Legal Proceedings

• Stockholder litigation in connection with the merger may result in significant costs of defense and liability (mentioned as a forward-looking risk).

Stakeholder Impact

• **Shareholders (Runway Growth)**: Expected NII accretion, improved dividend coverage and ROE, expanded leverage capacity, broader shareholder base, and increased trading liquidity.
• **Shareholders (SWK Holdings)**: Will receive consideration including $75.5 million in Runway Growth shares and approximately $145 million in cash, plus an additional $9 million from Runway Growth Capital LLC.
• **Employees (SWK Holdings)**: Members of SWK's healthcare and life sciences teams will join Runway Growth Capital's investment and deal sourcing teams, indicating integration and retention of expertise.
• **Customers/Portfolio Companies**: Expanded investment capabilities in healthcare and life sciences, potentially offering more diverse and robust financing solutions.

Next Steps

• Obtain SWK shareholder approval for the transaction.
• Secure necessary regulatory approvals.
• Satisfy other customary closing conditions for the merger.
• Hold a conference call to discuss the transaction on October 10, 2025.
• File a Combined Proxy Statement and Prospectus with the SEC for SWK shareholders and Runway investors.

Key Dates

Recommendation

The acquisition of SWK Holdings is a highly strategic move for Runway Growth, significantly enhancing its financial profile through expected mid-single-digit NII accretion, improved dividend coverage, and ROE. The transaction diversifies the portfolio into the high-growth healthcare and life sciences sectors, increasing exposure from 14% to 31%, and expands total assets to $1.3 billion. This non-dilutive blueprint for future growth, backed by BC Partners Credit, positions Runway Growth for sustained long-term value creation and strengthens its market position, making it a compelling investment opportunity.

Keywords

Venture Debt, Growth Stage Companies, Life Sciences, Healthcare Finance, Merger, Acquisition, BDC, Specialty Finance, Portfolio Diversification, NII Accretion, SWK Holdings, Runway Growth Finance