Cash offer
A cash offer gives target holders a stated cash amount subject to offer conditions and completion. It transfers less of the bidder's future business risk to selling shareholders than a share offer, but the bidder must fund the payment and consider liquidity, leverage, tax and financing cost. The economic outcome depends on the price and the benefits achieved, not merely the certainty of the form of payment. Tax and legal treatment vary by jurisdiction and recipient.
Worked example
A bidder offers $5 cash for each of 10 million target shares, requiring $50 million before fees. It compares available cash and new debt with the expected acquisition benefits and financial-risk constraints.
Common mistake
Assuming cash is free financing or that the bidder's value gain equals the target's total post-bid value.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Direct | September 2026–June 2027 |