audioboom pays part of Adelicious in shares and also does a £3.0M placing. why both?

The structure of Audioboom's acquisition of Adelicious, involving both shares and a £3.0M placing, can be explained by considering the strategic and financial motivations behind such deals:

1. Shares to Sellers (40% of Initial Payment):

   • Offering shares as part of the payment to the sellers of Adelicious likely serves to align their interests with Audioboom's future success. By holding equity in the acquiring company, the sellers have a vested interest in ensuring the smooth integration and continued growth of the business they are selling. This is a common practice in acquisitions, especially when retaining the expertise or involvement of the sellers is critical to the acquired business's success.

2. £3.0M Placing:

   • The placing is likely intended to raise the cash portion of the initial payment (£4.5M is 60% cash, which amounts to £2.7M) and potentially provide additional liquidity for operational needs or future investments. Placings are a straightforward way for companies to raise funds quickly, especially when they want to avoid taking on debt or depleting existing cash reserves.

3. Why Both Shares and a Placing?:

   • The combination of shares and a placing allows Audioboom to balance its financial strategy. Paying partly in shares reduces the immediate cash outflow, preserving liquidity, while the placing ensures they have the necessary funds to cover the cash portion of the deal. Additionally, issuing shares to the sellers can be seen as a way to incentivize them to remain engaged with the business post-acquisition, while the placing brings in new investors or strengthens the company's financial position.

4. Pricing of Shares:

   • If the pricing of the shares issued to the sellers and those sold in the placing differs, it could indicate different strategic purposes. Shares issued to the sellers might be priced based on a negotiated valuation tied to the deal, while the placing price would typically reflect market conditions and investor demand. If this information isn't disclosed, it might be worth checking regulatory filings or announcements for further details.

In summary, the dual approach of issuing shares to the sellers and conducting a placing is likely a strategic move to balance immediate financial needs, incentivize the sellers, and maintain liquidity. If the placing price and the share issuance price differ, it could reflect the distinct purposes of these transactions.

Sources: Winning at a Loser's Game? Control, Synergy and the ABInBev/SABMiller Merger, Spotify Going Public WIthout Bankers, Big Tech Fall Hard | The Daily Peel | 10/27/22, An Offer We Can Refuse | The Daily Peel | 2/10/23