How to Finance a Buyout or Merger
There are many ways to finance a buyout or merger of a company. You can finance a buyout by borrowing money based on assets you own yourself or you can borrow money based on the business value and assets of the company you wish to purchase. Mergers are also frequently financed by stock swaps or by issuing new stock in your company to use as payment to the target company's shareholders.
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Instructions
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Leverage the Other Company
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1
Research the assets and profitability of the company you would like to obtain. You can obtain much of the basic information by looking at the corporate records filed with the Secretary of State where the corporation is located.
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Hire an attorney or corporate banking firm to compile this information into a comprehensive report detailing the target company's worth.
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Approach banking institutions with your report and detail your plan for the buyout or merger. Then, request that the bank loan you the money to buy out enough stockholders to obtain a controlling interest in the company. You will then repay this loan through business profits or the sale of the business' assets.
Pay the Other Company With Your Stock
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Hire an investment banking firm to review the target company. Ask them to provide you with an estimate of the true worth of the other company's assets and future profits. You will need this information to decide how many shares of stock and at what price to trade in order to effectuate the merger.
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Negotiate with the other company for the exact amount and price of shares to be given to shareholders in exchange for ownership of the company.
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Issue the contracted for amount of shares in your company to the shareholders of the company with which you will merge. In this transaction, you are financing the acquisition of another company by having the target company's shareholders become shareholders in your company.
Sell Company Assets to Raise Cash
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Hire a corporate accounting firm to create a comprehensive overall picture of your company's assets and debts. Discuss with them which of your company's assets are no longer necessary or profitable to your business plan.
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Divest the company of the chosen assets to raise cash to finance your proposed merger or buyout.
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Tips & Warnings
Discuss your financing method with your mergers and acquisitions attorney. Tax and securities regulations vary depending on the manner in which a buyout or merger is financed.
