Template:M summ Equity Derivatives 12.1(j): Difference between revisions
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When you are doing a [[merger]] or acquisition you can do it by | 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 | |||
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 | 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}}”. | |||
Revision as of 20:28, 3 August 2023
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 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 2002 ISDA Equity Derivatives Definitions argot is “Share-for-Share”. Cash/jury rigged stuff you found in the sofa is “Other Consideration”, and a mixture of the two is “Combined Consideration”.