Mergers and acquisitions are transactions that the participant companies enter for financial benefits and with the aim of value creation, but they are also transactions that often come with high costs for all the parties involved. Very few companies are able to cover those expenses out of their pockets and they choose a different financing method – According to iKadre M&A consultants, here are the financing options available:
- Exchanging stocks – this method is quite safe for everyone involved. The solutions consist of the buying company exchanging its stock for shares in the seller company;
- Acquiring debt – many merger and acquisition deals are motivated by the seller’s inability to pay their debts. A frequently used method to finance the transaction on the buyer’s side is to take over the seller’s debt in return for ownership over the seller company;
- Initial public offerings – in this process, a company’s shares are sold to investors in order to raise capital for development;
- Loans – applying for a loan is perhaps the most expensive way to raise the money necessary for financing a merger and acquisition transaction. The loans available for these purposes usually come with higher than average interest rates, but in some situations, taking out a loan might be the only solution to move forward.