From the course: Mergers & Acquisitions
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Finance the deal
From the course: Mergers & Acquisitions
Finance the deal
- If you're like most companies, you don't have a big pile of cash sitting around, waiting for you to spend it on an acquisition. You might have to seek outside sources of funding to make your purchase. This could mean going to a bank for a loan, issuing bonds or stock to raise capital, or creating financing arrangements with the seller. Bank loans can be a cheap source of capital, as long as the deal won't financially strain your company too much. If the deal puts your future financial performance at risk, banks will likely charge a risk premium on that loan. If you're issuing bonds or stock, based on the deal risk, your financing costs might be higher. These options are typically only available to bigger companies. Seller financing can include paying for the deal over time. This enables you to finance the deal based on future performance of the combined entity. This is a complex structure. It has a lot of tax implications on both sides. Make sure you involve bankers and tax experts…
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