All-Cash Deal
An all-cash deal is an acquisition where one company pays cash to purchase the outstanding equity of another company. The precept here is that when buying with cash, there is less risk in the share price of the acquiring company going down, like it usually does, after the acquisition.
When one company buys another one, deal makers have a choice about what currency they want to use. We don't just mean choosing Euros or Yen or Quatloos or Dollars or whatever. The choice is even broader than that. The buying company might not even use money at all. Instead, one company could offer the other company's shareholders an exchange of stock.
In this case, shareholders of the company getting bought effectively become part owners in the company that's making the acquisition. They give up 100% ownership in the one company for a smaller stake in the bigger, combined company. The issue: You can't buy a meal in Las Vegas with company stock. (Or anywhere else, really, but we're trying to coin a phrase here).
To do anything else but get invited to shareholders' meetings, you would have to sell at least some of that stock to get cash in order to buy stuff. Meanwhile, using stock also causes a valuation issue, because the stock of both companies are moving day-to-day, meaning valuation is constantly changing. However, the all-cash deal has downsides as well. Because the shareholders are receiving a big pile of cash all at once, they might be on the hook for a big tax bill.
Companies can also split the difference, paying for acquisitions with a combination of of cash and stock. Deciding how to structure an acquisition (including whether to use cash or stock) is a big part of the negotiation process surrounding potential mergers. Like doing this? Become an investment banker. And make bank.
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Finance: What is The Difference Between ...6 Views
Finance allah shmoop What is the difference between a horizontal
merger and a vertical merger Okay Mergers let's talk rock
As in a feller he was kind of the king
of mergers both vertical and horizontal Let's Talk about what
comprises each of these things All right in the energy
industry specifically oil Ah horizontal monopoly would exist if a
company owned all the oil wells in the world And
in fact for a short time opec owned well it
was very close to a monopoly at least an enormous
percentage of all the oil wells in the world such
that they were able to constrain supply create panic and
increase prices dramatically some five hundred percent and change the
world during the nineteen seventies when we had a very
weak president going against them and here's what inflation adjusted
prices for a barrel of oil looked like in that
period So that's a horizontal monopoly like where you own
all the sources of oil coming out of the ground
horizontal So what's a vertical monopoly Well in the process
of processing oil a lot has to happen for the
system to work right first step you have to pull
All the oil out of the ground right the oil
well but then you have to process it or synthesize
it from dinosaur coop into well something that's actually usable
in your lexus with the turbo engine Then because the
world demand is continuous you have to store the oil
and then distributed continuously forever and ever and ever and
eventually the retail customer buyer has to be ableto pull
up into a gas station think real estate here and
fill her up So if you owned a vertical monopoly
while you would own the discovery and mining of oil
the synthesis or processing of it or refining of it
as it's called in the industry you don't a storage
company a trucking and distribution company and while then a
bunch of gas stations well that would be a fully
integrated vertical monopoly So when horizontal and vertical mergers get
discussed they get framed under this format So let's say
we're coric coffee machines and we want a vertical merger
in our business because we're sick and tired of paying
coffee growers twelve cents a cup for something well that
cost them less than a penny So we at keurig
Decide to buy our own coffee plantation roasting and grinding
and processing company so that we can supply our own
coffee in our own little cups Well that would be
a vertical merger in the coffee business And it often
makes a lot of sense because all that profit that's
been given out to coffee vendors selling to the kindly
loving caffeinated folks at koi rig with then be capped
and retained by the kindly loving shareholders of keurig vertical
versus horizontal Good ways to emerge and good ways to
have a baby too But we're a g rated site 00:02:51.243 --> [endTime] so we're just just saying moving on Oh
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