Classification of M&A deals based on how consideration is paid:
The payment (or consideration) for acquisition of share for acquisition of the corporate entity can be done in various ways. Following is the list of the ways in which the mergers and acquisition payments are made:
Cash deal:
In a cash deal, the acquirer pays the acquired company or the shareholders of the acquired company in cash. This is the most preferred mode by the business sellers.
Equity deal or stock deal:
In the equity deals, when two companies combine, the shareholders of the acquired company are paid in the form of shares of the new entity. The number of shares issued to them if such that the value of their stake is equal to the valuation of the target company in the form of a pre-fixed ratio. If the shareholders of the acquired company do not want to continue as investors with the merged entity they can sell the shares in the open market. If the company is not listed, then the acquisition contract (business transfer contract) may stipulate their rights in terms of disposal of shares. It helps the acquiring company to conserve the cash liquidity as not all the shareholders of the target company will sell their shares.
Any other instrument or security:
It is not necessary that the payment of acquisition is made on the spot and only through cash or equity. The application of payment of the consideration can be settled through issue of any kind of securities that is acceptable to the sellers of a business. These instruments can delete the payment of the consideration. They may be interest bearing.
Apohan very well understands the cash constraints of the acquired and cash requirements of the sellers in the mergers and acquisitions. Apohan helps a small and medium enterprise, in deciding the correct mode of realisation of the consideration of M&A deal. Apohan carries out professional, end-to-end, customized consultancy services by understanding how to successfully realised the M&A payments. Apohan manages the transaction right from the problem identification phase, to the closure of deal with perfection.