{"id":3324,"date":"2024-09-16T09:08:26","date_gmt":"2024-09-16T05:08:26","guid":{"rendered":"https:\/\/eoninvestment.com\/?p=3324"},"modified":"2024-09-16T09:08:26","modified_gmt":"2024-09-16T05:08:26","slug":"stock-vs-cash-acquisition","status":"publish","type":"post","link":"https:\/\/eoninvestment.com\/ka\/2024\/09\/16\/stock-vs-cash-acquisition\/","title":{"rendered":"Stock vs Cash Acquisition"},"content":{"rendered":"\n

Mergers and acquisitions can be executed either with cash or by transferring the shares of the new company. What is the difference?<\/p>\n\n\n\n

When the acquisition is done with cash, the entire risk of the transaction is borne by the shareholders of the acquiring company. In the case of an acquisition with shares, the risk of the transaction is also distributed to the shareholders of the selling company.<\/p>\n\n\n\n

What risk are we talking about? The risk that an excessively high premium might be paid during the acquisition. When one company buys another, it understands that it is paying more than the market price, but it hopes that the synergistic effects obtained after the acquisition will increase the overall value of the combined organization, compensating for the paid premium and leaving a profit. However, this is easier said than done.<\/p>\n\n\n\n

The motivation of the selling company is to cover up certain shortcomings and embellish the positive aspects to sell itself for a higher price. Therefore, when the transaction is done with shares instead of cash, these “embellishments” also impact the seller’s pocket.<\/p>\n\n\n\n

Additionally, whether the offer is made in cash or shares, it sends certain signals to the market. If it is done in cash, the management of the acquiring company signals that it is confident in making the right decision. On the other hand, if it is done with shares, it sends a signal that the management might see the intrinsic value of the shares as lower than the market value.<\/p>\n\n\n\n

Below is a hypothetical example that shows the impact of risk on the value of shareholders of both the selling and buying companies in the cases of cash and share-based transactions. The left column shows the scenario when the synergistic effect is not so good ($100 million), while the right column shows the case when the synergistic effect is good ($200 million).<\/p>\n\n\n\n

For formulas, refer to the Excel file.<\/a><\/p>\n\n\n\n

Source:<\/p>\n\n\n\n

Valuation, Measuring and Managing the Value of Companies – by McK.&Co, T. Koller, M. Goedhart, D. Wessels<\/p>\n\n\n\n

———————————————————————————————————-<\/p>\n\n\n\n

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\u10d2\u10d0\u10db\u10e7\u10d8\u10d3\u10d5\u10d4\u10da\u10d8 \u10dd\u10e0\u10d2\u10d0\u10dc\u10d8\u10d6\u10d0\u10ea\u10d8\u10d8\u10e1 \u10db\u10dd\u10e2\u10d8\u10d5\u10d0\u10ea\u10d8\u10d0\u10d0, \u10d3\u10d0\u10e4\u10d0\u10e0\u10dd\u10e1 \u10d2\u10d0\u10e0\u10d9\u10d5\u10d4\u10e3\u10da\u10d8 \u10dc\u10d0\u10d9\u10da\u10d4\u10d1\u10d8, \u10e8\u10d4\u10d0\u10da\u10d0\u10db\u10d0\u10d6\u10dd\u10e1 \u10d3\u10d0\u10d3\u10d4\u10d1\u10d8\u10d7\u10d8 \u10db\u10ee\u10d0\u10e0\u10d4\u10d4\u10d1\u10d8, \u10d8\u10db \u10db\u10d8\u10d6\u10dc\u10d8\u10d7 \u10e0\u10dd\u10db \u10db\u10d4\u10e2\u10d0\u10d3 \u10d2\u10d0\u10e7\u10d8\u10d3\u10dd\u10e1 \u10e1\u10d0\u10d9\u10e3\u10d7\u10d0\u10e0\u10d8 \u10d7\u10d0\u10d5\u10d8… \u10d0\u10db\u10d8\u10e2\u10dd\u10db \u10e0\u10dd\u10ea\u10d0 \u10e2\u10e0\u10d0\u10dc\u10d6\u10d0\u10e5\u10ea\u10d8\u10d0 \u10e5\u10d4\u10e8\u10d8\u10e1 \u10dc\u10d0\u10ea\u10d5\u10da\u10d0\u10d3 \u10d0\u10e5\u10ea\u10d8\u10d4\u10d1\u10d8\u10d7 \u10ee\u10d3\u10d4\u10d1\u10d0, \u10d4\u10e1 “\u10e8\u10d4\u10da\u10d0\u10db\u10d0\u10d6\u10d4\u10d1\u10d4\u10d1\u10d8” \u10d2\u10d0\u10db\u10e7\u10d8\u10d3\u10d5\u10d4\u10da\u10d8\u10e1 \u10ef\u10d8\u10d1\u10d4\u10d6\u10d4\u10ea \u10d0\u10ee\u10d3\u10d4\u10dc\u10e1 \u10d2\u10d0\u10d5\u10da\u10d4\u10dc\u10d0\u10e1.<\/p>\n\n\n\n

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\"\"<\/p>\n\n\n\n

\u10e4\u10dd\u10e0\u10db\u10e3\u10da\u10d4\u10d1\u10d8 \u10d7\u10e3 \u10d2\u10d0\u10d8\u10dc\u10e2\u10d4\u10e0\u10d4\u10e1\u10d4\u10d1\u10d7: Excel File<\/a><\/p>\n\n\n\n

\u10ec\u10e7\u10d0\u10e0\u10dd:<\/p>\n\n\n\n

Valuation, Measuring and Managing the Value of Companies – by McK.&Co, T. Koller, M. Goedhart, D. Wessels<\/p>\n","protected":false},"excerpt":{"rendered":"

Mergers and acquisitions can be executed either with cash or by transferring the shares of the new company. What is the difference? When the acquisition is done with cash, the entire risk of the transaction is borne by the shareholders of the acquiring company. In the case of an acquisition with shares, the risk of […]<\/p>\n","protected":false},"author":12998525,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","_crdt_document":"","advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[774675935,31110612,58642],"tags":[179,4269,6635,103,13843],"class_list":["post-3324","post","type-post","status-publish","format-standard","hentry","category-valuation-measuring-and-managing-the-value-of-companies-by-mck-co-t-koller-m-goedhart-d-wessels","category-excel-models","category-mergers-acquisitions","tag-business","tag-finance","tag-investing","tag-news","tag-stock-market","has-post-thumbnail","fallback-thumbnail"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_likes_enabled":true,"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/pQZ85-RC","_links":{"self":[{"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/posts\/3324","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/users\/12998525"}],"replies":[{"embeddable":true,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/comments?post=3324"}],"version-history":[{"count":19,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/posts\/3324\/revisions"}],"predecessor-version":[{"id":3511,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/posts\/3324\/revisions\/3511"}],"wp:attachment":[{"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/media?parent=3324"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/categories?post=3324"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eoninvestment.com\/ka\/wp-json\/wp\/v2\/tags?post=3324"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}