Buying another company is a major business move that can propel your organization to new heights. However, it also takes a lot of cash – and sometimes more than your company has on hand. That’s when it’s time to explore acquisition financing options, which are different ways that businesses raise money so they can acquire something of value like a competitor.

Cash

Companies with mississippi land purchase benefits and challenges free cash flow may choose to offer all-cash payments in their acquisition bids. That way, they can reduce their debt load and close the deal quickly. However, if their financial health isn’t good enough, they can seek out alternative lenders like business development companies (BDCs).

Stock

When an acquiring company offers to buy the target company with shares of its own stock, it dilutes the existing shareholders’ stakes in the acquired entity and may lead to a lack of confidence among investors. The acquiring company can compensate for this risk by offering more shares in the post-deal integration process.

Partial and step acquisitions

When an acquiring company buys a partial ownership interest in a target entity, it recognizes the fair value of the identifiable net assets acquired and assumes the associated liabilities. It also records a noncontrolling interest (“NCI”) in equity at fair value. The accounting for this is discussed in BCG 5-1 and 5-2.