Mezzanine debt is used to bridge the financing gap between bank debt and equity. It has an intermediary risk-return profile.

It can be structured as bonds with equity warrants attached, convertible bonds, or preferred shares, its remuneration is generally a combination of interest (paid and capitalised) and equity warrants.

Typical applications of mezzanine include financing buyouts, build-up operations, public-to-privates, internal or external growth, and restructurings.

Mezzanine is now a commonly used component of acquisition financing, as a majority of recent buyouts have included mezzanine tranches in their financing structures.