Transaction Type?

dayaaam

2226416I'm guessing a debt-free cash-free transaction is a 100% stock for stock deal.

Acquirors would choose this if they are concerned about the tax implications of an all cash deal on the target company's share holders.For example, if the target's share registry is largely comprised of highly taxed individuals who would prefer capital gains as opposed to immediate income tax via a cash offer then the acquiror would most likely go with a stock deal to ensure that is is received favourably and backed by the shareholders. Another reason may be that the acquiror's stock price is overvalued and it may thus be opportunistic for them to take advantage of it by paying in stock. Although the target company would probably be wary of this and demand a better exchange ratio.

Not too sure about the accretion / dilution aspect but I am guessing that stock deals are more dilutive because they are increasing the number of shares of the acquiror by issueing new stock to pay for the transaction. This has a flow on effect by diluting the earnings per share as the combined income is rationed out over a larger quantity of shares.

I think it comes down to the P/E ratios of the companys though. If a high PE acquirors a low PE company then it is EPS accretive. Conversely, if a low PE acquires a high PE then it is dilutive. The PE ratio is essentially a currency of exchange.

The above is a very textbook answer to your questions but I hope it helps you a bit.

dude what are you rambling about. A cash-free, debt-free transaction, just like it sounds, is when you buy an asset and don't assume of any cash or debt related to the asset or the parent/holding company. This is typicaly the case when you sell a division or a specific asset. No buyer is going to want to buy a division and assume $XX million of debt associated with it, the buyer only wants to buy the stuff necessary to run the acquired business. Cash-free, debt-free simplifies the transaction, as you don't have to worry about how you are going to collect AR, or how you are going to transfer debt without breaking convenants/restrictions, or having to negotiate with lenders on this.

Um the first guy is right dude. Re-read the question.

jhoratioIf the first words you type for your "answer" are "I'm guessing..." then for the good of us all just stop right there.

Well I didn't think the question was very well defined so the "guessing" reference was a caveat to my interpretation.

dayaaam

2226416Hey, just trying to help guys!

np and i meant no offense to you, but seems like there is an overwhelming amount of undergrad kids on this forum posting nonsense

No worries.