How to Finance Mergers and Acquistions
Provided that an acquiror has the cash readily available, payment for an acquisition in cash is certainly the cleanest and least complicated alternative
Debt financing allows an acquiror to purchase a company without diluting the equity in their company.
Mezzanine financing is similar to debt financing, however Mezzanine finance is subordinated debt, and often comes with higher interest rates and an equity component
An exchange of shares is fairly straightforward. The acquiror gives the acquiree a certain number of shares in the acquiror’s company as payment for the acquisition.
A public offering is similar to an exchange of shares in the sense that payment is received in the form of stock. but provides liquidity to both companies.
Revenue Share / Royalty / Earnout
Revenue share and earnout structures are rarely the sole compensation for the purchase of a company.
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