Professional Documents
Culture Documents
Concept
Could be:
Cash: need to find sources of generating cash
Stock: estimate valuation and exchange ratio
Affects returns of shareholders
Issues:
Tactical: to get the deal done
Strategic : operational issues
Cash Consideration
Advantages:
Speed of getting transaction done
Liquidity: sellers usually prefer cash
Disadvantages:
Difficulty in arranging it from buyer’s viewpoint
From seller’s viewpoint:
capital gains tax is not deferred
no continuing equity interest in combined firm
Sources of Acquisition of Cash
Commercial banks:
Terms depend on creditworthiness of borrower/ transaction
structure
Are senior, and secured
Restrictive covenants