• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA Books

Books for Sept'23 ACCA exams
Get your discount code >>

ACCA June '23 Exams

Instant Poll
Read & post comments >>

New! Ask ACCA AI Tutor

Post your questions
& get instant answers >>

Cash for Share offer (M&A)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Cash for Share offer (M&A)

  • This topic has 6 replies, 2 voices, and was last updated 3 weeks ago by John Moffat.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • May 17, 2023 at 10:19 pm #684543
    simranxdeep
    Participant
    • Topics: 33
    • Replies: 51
    • ☆☆

    Hi Sir,
    I’ve been having a small doubt while calculating the Equity Value of the Acquirer while in a Cash for Share offer.
    The Value of equity is calculated by –
    (Equity value of combined Co – Cash paid to target Co) / No of shares of the Acquirer’s Co.

    Here, why exactly do we subtract the cash paid from the equity value?

    May 17, 2023 at 10:28 pm #684544
    simranxdeep
    Participant
    • Topics: 33
    • Replies: 51
    • ☆☆

    Q2)
    While calculating the gain, what I actually do while presenting the answer is – I calculate the total market value of both the companies before and after the acquisition, and then find the gain in Market Values. which, eventually is the gain per share price.
    Is this approach correct?

    (Image for reference)
    https://pasteboard.co/31YBXGJYAKay.png

    May 18, 2023 at 8:03 am #684572
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 52540
    • ☆☆☆☆☆

    Just suppose that a company with a MV of 500 takes over another company with a MV of 200. You could only say that the new MV of the company is 700 if they didn’t have to pay anything for the other company. If they had to pay out 100 to acquire the other company then the new MV would be 500 – 100 + 200 = 600.

    May 18, 2023 at 8:28 am #684574
    simranxdeep
    Participant
    • Topics: 33
    • Replies: 51
    • ☆☆

    Good Morning Sir,

    But, should a cash expense (here, the cash paid to the co. of MV 200) be deducted from the Market Value of Equity of another company?

    Also, if you could please take a look at the second question as well, Sir? I posted it just below the first question in this thread.

    May 18, 2023 at 4:05 pm #684603
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 52540
    • ☆☆☆☆☆

    It doesn’t affect the other company at all – they are being paid cash for their equity.

    What you write in your second questions sounds correct (but I cannot comment on the figures because you have not told me where to find the question).

    May 18, 2023 at 5:45 pm #684617
    simranxdeep
    Participant
    • Topics: 33
    • Replies: 51
    • ☆☆

    There might’ve been miscommunication from my side.
    I was asking about the company that has paid the cash, why is the cash outflow subtracted from its equity value?

    May 19, 2023 at 9:10 am #684645
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 52540
    • ☆☆☆☆☆

    No – I understood what you meant.

    The company paying the cash is the acquiring company, and if they pay out cash for any reason then the value of the company is reduced.

  • Author
    Posts
Viewing 7 posts - 1 through 7 (of 7 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

Changes to the SBL exam from September 2023

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

 

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • Na-eemsmallz on FA Chapter 2 Questions The Statement of Financial Position and Statement of Profit or Loss
  • mariochase24 on FM Chapter 7 Questions – Investment appraisal – methods
  • adaacca on The valuation of securities – The valuation of equity – ACCA Financial Management (FM)
  • komoszeczka on PM Chapter 1 Questions Activity based costing
  • John Moffat on FM Chapter 7 Questions – Investment appraisal – methods

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy