23.5 MODES OF MERGER FINANCING
After the consideration value is determined, payment is made to the target firm. There are different modes of payment. They are as follows:
- Cash payment;
- Exchange of equity shares;
- Exchange of preference shares and debentures; and
- Payment under deferred payment plan.
23.5.1 Cash Payment
Payment in cash is the least cumbersome. Moreover, it has a favourable effect on the eps. The reason is that the number of shares outstanding does not increase, whereas the inclusion of the earnings of the target firm leads to a swell or increase in the earnings of the acquiring firm. However, this does not mean that this is the best way of paying the consideration value. It is a taxable transaction and so net gains will be lower. ...
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