Pit & Quarry, October 2018
Acquisition of assets In a purchase of assets one business acquires only the assets of another business Asset purchases are common during bankruptcy proceedings where other businesses bid for various assets of the bankrupt business which is liquidated after the final transfer of assets to the acquiring business PAYING FOR IT ALL Because M A transactions are expensive adequate funding is necessary Fortunately financing an M A transaction with stock is a relatively safe option for both parties since both share the risk In a typical share exchange transaction the buyer will exchange shares in their own business for shares in the selling business Paying with stock is especially advantageous for a buyer particularly if their shares are overvalued In a merger shareholders on both sides can reap long term benefits of a stock swap as they generally receive an equal amount of stock in the newly formed operation rather than simply receiving cash for their shares Paying with cash is the most obvious alternative After all cash transactions are instant relatively mess free and usually dont require the same kind of complicated management as stock would Unfortunately smaller aggregate businesses without large cash reserves must usually seek alternative financing options in order to fund their M A transaction One popular alternative to paying for an M A with either stock or cash involves agreeing to take on the debt owed by a seller ASSUMING THE BURDEN OF DEBT For many businesses debt is the reason for the sale Unfortunately debt can reduce a sellers value often to the point of worthlessness From a buyers point of view this strategy is often a cheap means of acquiring assets Being in control of a large amount of an operations debt usually means increased control over management in 34 PIT QUARRY October 2018 pitandquarry com
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