Mergers And Acquisitions Financing: Debt, Equity, And Hybrid Approaches

Mergers and acquisitions basically happen when one business either puts together with or buys another one. In this arena, there are two main types of buyers: strategic and financial. Strategic buyers are those who go after another company or its assets for a long-term investment. They usually search for businesses that are in the same field or something closely related, looking to combine their strengths. Debt financing is how companies get money by borrowing from creditors like banks and investment firms. Over the past century, debt financing has, arguably, seen more innovation than any other finance area. Some types of debt financing include: Bonds: Often known as ‘fixed income’ securities, bonds tend to be linked to public companies, but private firms can also issue them through middlemen. Debentures: These are a kind of bond, but instead of having collateral, the company just leans on its reputation. Bank loans: This is something most people probably know about. Smaller businesses have faced issues lately because banks have tightened up on giving out loans, which forces small companies to look for other options. Mortgages: A mortgage is a loan that’s taken out on a physical asset, usually a building. The amount of the loan is determined by the asset's value, and the interest gets paid over several years. Refinancing properties with mortgages can be one way for a company to bring in cash. Recurring revenue lending: This way of debt financing is especially loved by SaaS companies or basically aany business that has mostly ongoing revenue. They get debt based on a percentage of their monthly recurring income. Equity financing is all about raising funds by selling shares of a company. The company gets money in return for some ownership, and the new equity holder becomes part-owner, which lets them gain from future dividends and cash flows, or to sell their shares when they want. Equity financing can mean a lot of different things in practice. There are different kinds of equity too. You got preferred stock, convertible preferred stock, common shares, and even warrants. So, depending on where the company stands and who it's talking to, the equity financing can turn out differently. Types of equity financing include: IPO: As I mentioned in a previous article, an IPO happens when a company puts its shares on a public stock exchange. Stock exchange: A company that’s already listed can, if there’s any interest in its shares, do equity financing by selling its common stock that’s publicly listed. Private equity: Private companies are able to sell their stock to private equity firms for equity financing. CONTACT US FOR MORE INFO:- https://www.factsheetinc.com/ #MergersAndAcquisitions #M&A #AcquisitionFinancing #InvestmentBanking #PrivateEquity