Chapter 12

Financing the Transaction


Bullet Examining various ways to finance and structure deals

Bullet Sorting out types of investors

Bullet Comparing majority and minority transactions

Bullet Recognizing the cost of capital

Before discussions between a buyer and seller heat up — and possibly burn out due to lack of planning — buyers need to line up their financing for acquisitions, and sellers should ascertain buyers’ ability to come up with the dough.

In this chapter, I explore the various methods that help buyers finance the acquisition of companies, including where buyers secure the necessary capital, what exactly they’re buying, and what those transactions look like.

Exploring Financing Options

To many, buying a company means an exchange of cash: The seller gets some dough, and the buyer gets the company. This transaction implicitly states that the payment is currency, to be paid now, and the price is fixed. Although that’s one way to finance a deal, it’s not the be-all and end-all of M&A transactions. Timing, currency, and even the amount of payment all affect a deal’s financing. ...

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