M&A Case studies Questions and correct
answers
Why do companies need capital? - Correct Answer - Acquire another company
- Acquire an asset, e.g. asset purchase
- Other expansion plans, e.g. new HQ
- Crisis
Sources of Capital - Correct Answer -equity finance
- debt finance
- cash, not way of raising money but can finance something
- fund raise, PE context
Equity Finance - Correct Answer - issuing shares in yourself to raise capital
pros of Equity finance as a private company - Correct Answer - brains + money from private investors.
- no repayment or interest
- no covenants
cons of equity finance as private company - Correct Answer - dilution, ownership stake diluted because
more shares
Equity for bigger private companies - Correct Answer IPO, private company lists shares on the stock
exchange. Min 25% float
pros of IPO - Correct Answer - raise large sums
- 'stamp approval'
- is exit route, e.g. PE context can sell shares
- great for general expansion
, cons of IPO - Correct Answer - red tape
- disclosure requirements
- long and expensive process
- public share price puts short term pressure on the board. changes how a company is run
IPO as way of funding M&A - Correct Answer wouldn't IPO to fund one acquisition
Lawyer's role in IPO - Correct Answer - DD
- drafting prospectus
- roadshow, marketing the shares
- compliance/regulatory approval
- work with investment banks
Ways Public Companies raise equity - Correct Answer - rights issue: offer existing SHs newly allocated
shares on pro rata basis. This means their proportion of shares is not diluted.
- private placing, sell shares to selected institutional investors. Not going to the public, scope out who
you want to sell the shares to
- open offers, similar to rights issue
How PE gets equity - Correct Answer - PE uses money from fund not through shares. Go on fundraising
process and go to institutional investors. Money is in the form of commitments, not cash.
What is a fund - Correct Answer A fund is essentially a legal vehicle that pulls a fund together from
investors
Debt finance types - Correct Answer - loans
- bonds
what is a loan - Correct Answer a loan is a sum of money that you borrow, usually paid back over time
with interest. Typically between company and ban
answers
Why do companies need capital? - Correct Answer - Acquire another company
- Acquire an asset, e.g. asset purchase
- Other expansion plans, e.g. new HQ
- Crisis
Sources of Capital - Correct Answer -equity finance
- debt finance
- cash, not way of raising money but can finance something
- fund raise, PE context
Equity Finance - Correct Answer - issuing shares in yourself to raise capital
pros of Equity finance as a private company - Correct Answer - brains + money from private investors.
- no repayment or interest
- no covenants
cons of equity finance as private company - Correct Answer - dilution, ownership stake diluted because
more shares
Equity for bigger private companies - Correct Answer IPO, private company lists shares on the stock
exchange. Min 25% float
pros of IPO - Correct Answer - raise large sums
- 'stamp approval'
- is exit route, e.g. PE context can sell shares
- great for general expansion
, cons of IPO - Correct Answer - red tape
- disclosure requirements
- long and expensive process
- public share price puts short term pressure on the board. changes how a company is run
IPO as way of funding M&A - Correct Answer wouldn't IPO to fund one acquisition
Lawyer's role in IPO - Correct Answer - DD
- drafting prospectus
- roadshow, marketing the shares
- compliance/regulatory approval
- work with investment banks
Ways Public Companies raise equity - Correct Answer - rights issue: offer existing SHs newly allocated
shares on pro rata basis. This means their proportion of shares is not diluted.
- private placing, sell shares to selected institutional investors. Not going to the public, scope out who
you want to sell the shares to
- open offers, similar to rights issue
How PE gets equity - Correct Answer - PE uses money from fund not through shares. Go on fundraising
process and go to institutional investors. Money is in the form of commitments, not cash.
What is a fund - Correct Answer A fund is essentially a legal vehicle that pulls a fund together from
investors
Debt finance types - Correct Answer - loans
- bonds
what is a loan - Correct Answer a loan is a sum of money that you borrow, usually paid back over time
with interest. Typically between company and ban
