There are a variety of ways companies can acquire each other. Frequently used methods include all cash, a combination of cash and stock, and a leveraged buyout in which the acquirer uses debt to finance the purchase. Another common takeover strategy is the all-stock strategy.
The first step in an all-stock takeover is the announcement of the deal. The acquiring company tells investors how much of its own stock it plans to use to complete the deal. For example, ABC Corp. announces that it will acquire XYZ Inc. in an all-stock deal on a one-for-one basis. That means XYZ shareholders will get one share of ABC for each XYZ share they own. If XYZ has 100 million shares outstanding, ABC must issue 100 million new shares to complete the deal.
Shareholders in the acquired company are eventually contacted by the company or a bank acting on its behalf as the completion date draws near. The acquired company will reiterate the deal terms. Then it will give investors an expected completion date. Investors will have until that date to sell their shares if they don’t want to take shares in the purchasing firm.
The Independent Stock Market provides its participating companies with the option to sell its stock in exchange for ownership in either competitive or complementary organizations.
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