Forms of consideration

In this lesson

1. 0:00 Lesson 18: Financing Mergers and Acquisitions
2. 0:25 Forms of Consideration Overview
3. 1:07 Cash Offers Explained
4. 1:33 Share for Share Exchange
5. 2:09 Earn Out Arrangements and Risk Management

About this lesson

This is essential knowledge for the Financing, Mergers and Acquisitions section of your exam, where you need to evaluate acquisition strategies and their financial implications. The lesson covers two primary payment methods. With a cash offer, target company shareholders receive a fixed cash amount per share they hold. With a share exchange, they receive new shares in the acquiring company instead, becoming shareholders in the combined entity. You'll also explore earn outs, where the acquisition price is split between an upfront payment and deferred payments tied to specific performance targets—a strategy that helps the purchaser manage risk when the full details of the target company aren't yet known. Understanding these forms of consideration is crucial for analysing real acquisition scenarios and answering exam questions about deal structure and valuation. You'll be able to evaluate the advantages and disadvantages of each approach from both the buyer's and seller's perspective, and recognise when each method is most appropriate.

Duration: 3m