Corporate Finance - Merger Consideration

Mergers can be financed with several types of consideration: (1) cash, (2) securities, or (3) a combination of cash and securities. The downside of paying all-cash consideration is that the bidding firm might need to take on debt to afford the takeover. When the bidder offers to pay with stock, the bidder must decide whether to offer a set number of shares (fixed exchange ratio) or a set value of shares (floating exchange ratio). If a floating exchange ratio is used, the deal might also include a collar: this is a floor or ceiling on the amount of shares the bidder will pay for the target. For cash deals, stock deals, or a combination thereof, the price that the bidding firm is offering for the target may be fixed or variable. A fixed price is straightforward; e.g., the bidding firm offers to pay $7 billion for the target. A variable price occurs when the bidder's offer has a contingent component, such as an earnout or contingent value rights.— Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world. — SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS: • A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING • A 44-PAGE GUIDE TO U.S. TAXATION • A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS • MANY MORE FREE PDF GUIDES AND SPREADSHEETS * http://eepurl.com/dIaa5z — SUPPORT EDSPIRA ON PATREON *https://www.patreon.com/prof_mclaughlin — GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT * https://edspira.thinkific.com — LISTEN TO THE SCHEME PODCAST * Apple Podcasts: https://podcasts.apple.com/us/podcast/scheme/id1522352725 * Spotify: https://open.spotify.com/show/4WaNTqVFxISHlgcSWNT1kc * Website: https://www.edspira.com/podcast-2/ — GET TAX TIPS ON TIKTOK * https://www.tiktok.com/@prof_mclaughlin — ACCESS INDEX OF VIDEOS * https://www.edspira.com/index — CONNECT WITH EDSPIRA * Facebook: https://www.facebook.com/Edspira * Instagram: https://www.instagram.com/edspiradotcom * LinkedIn: https://www.linkedin.com/company/edspira — CONNECT WITH MICHAEL * Twitter: https://www.twitter.com/Prof_McLaughlin * LinkedIn: https://www.linkedin.com/in/prof-michael-mclaughlin — ABOUT EDSPIRA AND ITS CREATOR * https://www.edspira.com/about/ * https://michaelmclaughlin.com