M&A: does the money go to the founder or company?
Currently working in corporate strategy for a company, we're in the process of acquiring another company to expand into a new market.
We're buying the company for a total purchase price of $20m and it's a privately owned 100% by the founding team.
But I'm confused where the $20m goes? Does that money just go straight into the founders pockets?
It goes to the shareholders of the company, in net form (debt-free, cash-free). Occasionally there will be stipulations about $N dollars going to the Company’s balance sheet, but it depends on who is buying the business and other context.
Conceptually you're just buying all the shares of the company, so yeah it goes to the shareholders
To whoever holds the shares and is selling
Depends on what you are talking about. Is $20m only the actual cash your company paid? Then is some case a part of it is used to repay the existing debt of the Company. You might as well have financed the acquisition with financial debt, in which case it add up to the cash you paid.
Also have to see the sources and uses because in some cases the cash position move (cash used or cash injected during the operation).
General case, yes the money paid for a 100% acquisition goes to the shareholders but there are some ajustements in each process.
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