If there are companies that buy, it is obvious that there are companies that sell. But the reasons for selling are different from the reasons for buying:
Purchase or merger
The question that opens this chapter says: could I buy from my main competitor? The answer is that there should be very concrete and specific circumstances that make this fact unlikely. Our main competitor will be a company of a similar size to ours, so it would be a purchase that our balance sheet would hardly support without a capital contribution. But the right circumstances could arise if our competitor had:
– Similar sales and much lower margins.
– A balance sheet with a lot of debt, the result of wrong investment decisions that call into question its repayment capacity.
– Lack of succession in the business.
Therefore, just as we look at our competitors’ products, we can also look at their financial situation. Financial information is mandatory and publicly accessible through the Commercial Registry. All companies deposit the annual accounts every year, and they are available to everyone.
Consider the possibility of buying from our competitor is a healthy exercise that requires us to:
– Compare our financial accounts following the analyzes we have presented and drawing the appropriate conclusions for the management of our company.
– Valuing our business and monitoring the evolution of its value annually.
– Assess the business of our competitor using the same model and comparing its evolution, with which we can check the economic and financial strength of our business compared to the companies in our sector and take the opportunity to make the most appropriate financial policy decisions.
Although unlikely, the purchase opportunity may exist. And if not, we can contemplate the opportunity of a merger. A merger is an operation similar to buying and selling but does not consume cash. Two companies that decide to merge their businesses their separate businesses into one, thus optimizing the structural costs and seeking new synergies of products, markets and industrial plants to be much more competitive.
A merger involves valuing the companies participating in the operation and determining what is technically called the exchange equation. Let’s imagine two companies that want to merge and that are valued at 100 and 50 respectively. The equation of change would be 2 to 1, that is, if the company created from the merger of the two businesses has 100 shares, the shareholders of the first company would receive 66.6 shares, 2/3 of the total, and the of the second they would receive 33.3 shares, 1/3, thus maintaining the ratio of 2 to 1.
A merger can also be done by absorption. That is, in the previous case, the largest company could absorb the smallest, making an issue of 50 new shares that would be purchased by the partners of the second company and that would be paid with the contribution of the company’s current shares. absorbed.
The decision on the structure of a merger has strong mercantile and fiscal implications that are solely for the financial
The reasons to sell a company
If there are companies that buy, it is obvious that there are companies that sell. But the reasons for selling are different from the reasons for buying:
Purchase or merger
The question that opens this chapter says: could I buy from my main competitor? The answer is that there should be very concrete and specific circumstances that make this fact unlikely. Our main competitor will be a company of a similar size to ours, so it would be a purchase that our balance sheet would hardly support without a capital contribution. But the right circumstances could arise if our competitor had:
– Similar sales and much lower margins.
– A balance sheet with a lot of debt, the result of wrong investment decisions that call into question its repayment capacity.
– Lack of succession in the business.
Therefore, just as we look at our competitors’ products, we can also look at their financial situation. Financial information is mandatory and publicly accessible through the Commercial Registry. All companies deposit the annual accounts every year, and they are available to everyone.
Consider the possibility of buying from our competitor is a healthy exercise that requires us to:
– Compare our financial accounts following the analyzes we have presented and drawing the appropriate conclusions for the management of our company.
– Valuing our business and monitoring the evolution of its value annually.
– Assess the business of our competitor using the same model and comparing its evolution, with which we can check the economic and financial strength of our business compared to the companies in our sector and take the opportunity to make the most appropriate financial policy decisions.
Although unlikely, the purchase opportunity may exist. And if not, we can contemplate the opportunity of a merger. A merger is an operation similar to buying and selling but does not consume cash. Two companies that decide to merge their businesses their separate businesses into one, thus optimizing the structural costs and seeking new synergies of products, markets and industrial plants to be much more competitive.
A merger involves valuing the companies participating in the operation and determining what is technically called the exchange equation. Let’s imagine two companies that want to merge and that are valued at 100 and 50 respectively. The equation of change would be 2 to 1, that is, if the company created from the merger of the two businesses has 100 shares, the shareholders of the first company would receive 66.6 shares, 2/3 of the total, and the of the second they would receive 33.3 shares, 1/3, thus maintaining the ratio of 2 to 1.
A merger can also be done by absorption. That is, in the previous case, the largest company could absorb the smallest, making an issue of 50 new shares that would be purchased by the partners of the second company and that would be paid with the contribution of the company’s current shares. absorbed.
The decision on the structure of a merger has strong mercantile and fiscal implications that are solely for the financial
© Anquor Corporate Finance. All Rights Reserved
Naming and corporate identity by Little Buddha
Leave a Reply