Practice // Questions and comments // Pros and cons of cash and share offers

Financial engineering : Question 12
What are the respective advantages of a public purchase offer and a public exchange offer? Which would be better for the target company and which for the initiator of the takeover?

ALL THEMES
  • COST OF CAPITAL
  • FINANCIAL ANALYSIS
  • FINANCIAL ENGINEERING
  • FINANCIAL MANAGEMENT
  • FINANCIAL POLICY
  • VALUATION
Briefly, a share exchange offer is generally a more friendly way of linking up than a takeover through the purchase of the target's shares, but this is not always the case (Vodafone/Manesmann, Sanofi/Aventis). The acquirer does not have to pay out cash and take out debt simultaneously, and in most countries, the shareholder of a target that accepts the offer, does not have to pay capital gains tax.

For more information, see chapter 45 of the Vernimmen.