How to Finance Mergers and Acquistions
Cash
Provided that an acquiror has the cash readily available, payment for an acquisition in cash is certainly the cleanest and least complicated alternative
1
Senior Debt
Debt financing allows an acquiror to purchase a company without diluting the equity in their company.
2
Mezzanine
Mezzanine financing is similar to debt financing, however Mezzanine finance is subordinated debt, and often comes with higher interest rates and an equity component
3
Stock
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.
4
Public Offering
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.
5
Revenue Share / Royalty / Earnout
Revenue share and earnout structures are rarely the sole compensation for the purchase of a company.
6
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