Template:M summ Equity Derivatives 12.1(f)-(k): Difference between revisions

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Our friends in the M&A advisory business — they are better paid and more impressively heeled than we — have no shortage of imaginative ways for investors to stump up the necessary to acquire new companies, or parts of old ones the current owner no longer wants, but basically they boil down  to (i) being given {{eqderivprov|New Shares}} (usually in the acquiror, or a “newco” it has established for the [[Special purpose acquisition companies|purpose]]), (ii) being paid cash (or given something else that ''isn’t'' {{eqderivprov|New Shares}}, or (iii) a combination of the two.
Our friends in the M&A advisory business — they are better paid and more impressively heeled than we — have no shortage of imaginative ways for investors to stump up the necessary to acquire new companies, or parts of old ones the current owner no longer wants, but basically they boil down  to (i) being given {{eqderivprov|New Shares}} (usually in the acquiror, or a “newco” it has established for the [[Special purpose acquisition companies|purpose]]), (ii) being paid cash (or given something else that ''isn’t'' {{eqderivprov|New Shares}}, or (iii) a combination of the two.
When you are doing a [[merger]] or acquisition you can do it by:
A “share swap” — the acquiror gives target shareholders a (small) portion of the acquiror’s existing share capital in return for a (large or total) portion of the target’s [[Equity securities|share capital]], or
By issuing new shares — here the acquiror issues some new shares, or perhaps creates a new merged entity that will issue new shares in return for the target company’s shares —— and in either case the selling shareholders become shareholders in the acquiring company (or the newco) and, more importantly, the acquiror doesn’t have to spend or god forbid ''borrow'' any cash to make the acquisition; or
By the acquiror paying in hard cash (usually) or (less usually) some other kind of consideration it found down the back of the sofa or cobbled up from the last three nights’ leftovers. In this case the selling shareholders are out of the game, no longer having any exposure to the sold company or its acquiror, and therefore the acquiror has had raise some money somehow to finance the acquisition.
Or, of course, you could ''combine'' these methods, paying with some of your own shares and some cash ([[and/or]] stuff you found in the sofa).
A “share swap” in {{eqdefs}} argot is “{{eqderivprov|Share-for-Share}}”. Cash/jury rigged stuff you found in the sofa is “{{eqderivprov|Other Consideration}}”, and a mixture of the two is “{{eqderivprov|Combined Consideration}}”.

Latest revision as of 04:36, 5 August 2023

Here we find the mechanical ways of describing the different ways a shareholder can be persuaded to part with its existing Shares and thereby agree to a Merger or accept a Tender Offer.

Our friends in the M&A advisory business — they are better paid and more impressively heeled than we — have no shortage of imaginative ways for investors to stump up the necessary to acquire new companies, or parts of old ones the current owner no longer wants, but basically they boil down to (i) being given New Shares (usually in the acquiror, or a “newco” it has established for the purpose), (ii) being paid cash (or given something else that isn’t New Shares, or (iii) a combination of the two.

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