Chinese name
Cash acquisition
way
Pay a certain amount of cash
purpose
Obtain ownership of the target company
Merging company
This is also a cash acquisition.
Applicability of defining advantages and disadvantages ta said
definition
In this case, the shareholders of the target company can get some form of bills, but not including shareholders' rights and interests, but only some form of deferred cash payment. Once the shareholders of the target company receive the cash payment for their shares, they lose any rights and interests in the original company, which is a remarkable feature of the cash acquisition method. Cash purchase is the clearest and quickest payment method in enterprise M&A activities, which occupies a high proportion in all kinds of payment methods.
merits and demerits
Advantages of cash acquisition: 1, and the valuation is simple and clear.
2. From the acquirer's point of view, the biggest advantage of using cash as a payment tool is its speed, which can make the hostile target company unprepared and unable to get enough time to implement anti-merger measures. At the same time, it also makes the companies bidding with the acquirer or potential rival companies unable to compete with them because it is difficult to raise a large amount of cash at the moment, which is conducive to the completion of the acquisition transaction as soon as possible.
3. For the target company, cash acquisition can convert its virtual capital into cash in a short time. The target company does not need to bear the securities risk, and will not be affected by the development prospect, interest rate and inflation rate of the merged company in the future. Delivery is simple and clear, so it is often the most willing payment method for the target company.
Cash acquisition
Disadvantages of cash acquisition: 1. For the acquirer, the cash acquisition of the target company will not "dilute" the existing shareholders' rights and interests, but will be a heavy immediate cash burden.
2. For the shareholders of the target company, the cash purchase method makes it impossible to postpone the recognition of capital gains, thus advancing the tax payment time and not enjoying preferential tax treatment.
adaptability
Because cash acquisition has the advantages of fast speed and simple delivery, it is especially suitable for hostile acquisition. Chevron 1984 acquired Gulf Oil Company and Philip Morris Company 1988 acquired Covent Company in cash, of which