Is the convertible preferred stock a good choice as the consideration in an M&A deal
Is the convertible preferred stock a good choice as the consideration in an M&A deal?
The acquiring company may not have enough money and already have a high financial leverage.
And the convertible preferred stock can carry a steady flow of dividends, which may be appealing to shareholders of the target firm. The convertible preferred stock also won't increase the financial leverage of the acquiring firm.
But it seems that it's not very common to use the conv. pref. stock as the consideration. I can't find the reasons. Would anyone be kind enough to give me some clues? Thanks.
I worked in PE the last 2 years before starting b-school in August. I started to see more deals using conv preferred as the credit markets tightened. Given the profile of the acquiring company conv. preferred sounds like a decent choice. How highly leveraged is the acquiror?
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