Page "Mergers and acquisitions" Paragraph 34
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Wikipedia
When submitting an offer, the acquiring firm should consider other potential bidders and think strategically.
With pure cash deals, there is no doubt on the real value of the bid ( without considering an eventual earnout ).
Taxes are a second element to consider and should be evaluated with the counsel of competent tax and accounting advisers.
Third, with a share deal the buyer ’ s capital structure might be affected and the control of the buyer modified.
If the issuance of shares is necessary, shareholders of the acquiring company might prevent such capital increase at the general meeting of shareholders.
Then, the balance sheet of the buyer will be modified and the decision maker should take into account the effects on the reported financial results.
For example, in a pure cash deal ( financed from the company ’ s current account ), liquidity ratios might decrease.
On the other hand, in a pure stock for stock transaction ( financed from the issuance of new shares ), the company might show lower profitability ratios ( e. g. ROA ).
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