Upload
ayush-gupta
View
1.312
Download
0
Embed Size (px)
Citation preview
Methods of Payment
By- Ayush GuptaUniversity Business School
MBA-IB
A.G
Basic M&A Transactions
A.G
Methods of Payments• Cash
• Share Exchange
• Cash Underwritten Share
• Loan Stock
• Convertible Loan or Preference Shares
• Deferred Payment
A.G
₹1450 crore
A.G
Methods of Payments• Cash
• Share Exchange
• Cash Underwritten Share
• Debentures
• Convertible Loan or Preference Shares
• Deferred Payment
A.G
BUYERBUYER SELLERSELLER
BUYERBUYER SELLERSELLER
Institutional Institutional InvestorInvestor
• Cash Underwritten ShareA.G
Methods of Payments• Cash
• Share Exchange
• Cash Underwritten Share
• Debentures
• Convertible Loan or Preference Shares
• Deferred Payment
A.G
Factors Affecting Choice of Financing Method for
M&A• Acquirer’s liquidity position.
• Acquirer’s recent stock price performance.
• Pre-Acquisition leverage.
• Nature of Business being acquired.
• Ownership and control structure of acquirer
• Ownership and control structure of target firms.
A.G
Cash vs Stock offerBuyer IncBuyer Inc Seller IncSeller Inc
$5B = 50M × $100 $2.8B = 40M × $70
$1.7B• Buyer Inc announce offer to buy all shares of
Seller Inc at $100 per share.
• Value placed on Seller Inc is $4B, a premium of $1.2B
A.G
Shareholder Value Added
• Difference between estimated value of synergy and acquisition premium
• If Buyer Inc. chooses to pay cash then
SVA = $1.7B(expected synergy) - $1.2B(premium) = $500M
A.G
• If Buyer Inc. finance by issuing new shares
• acquiring shareholders will own 55.5% of total 90M shares
• their expected SVA is 55.5% of $500M i.e $277.5M
A.G
A.G
Buyer IncBuyer Inc Seller IncSeller Inc
Cash offer $500M
Stock offer $277.5M $222.5M
A.G
See you soon
Thank You Very Much
References• Ray, K. (2011). Mergers and acquisitions:
Strategy, valuation and integration. New Delhi: PHI Learning Private Limited.
• Stock or Cash?: The Trade-Offs for Buyers and Sellers in Mergers and Acquisitions. (1999, November 1). Retrieved September 8, 2015.