This Critique Will Review The Article “Stock Or Cash? The

1187 WordsJan 27, 20175 Pages
This critique will review the article “Stock or Cash? The Trade-Offs for Buyers and Sellers in Mergers and Acquisitions” by Alfred Rappaport & Mark L. Sirower. The purpose of this article is to offer managers and stockholders a new way to think through the process of acquiring or selling a company. Also, this article provides insight about when it would be helpful to use cash, stock, or a mixture of both. According to the article, mergers and acquisitions have become a new means for a company to grow. In years previous, mergers were paid for entirely in cash. Now however, mergers are seen being paid for all in stock. This article allows managers and stockholders to ask themselves necessary questions in order to make the decision that is…show more content…
Also, the shareholders of the acquired company can be more vulnerable to decreases in price of stock because they are assuming part of the price risk in this structure. Companies also have the option of using the fixed value of shares structure. By using this structure, the number of shares does not become fixed until the date that the transaction is closed. This means that the proportion of ownership of the company that is continuing is not know until the end of the deal. With this structure, the acquiring company assumes all the price risk from the time the merger is announced until the time the deal is closed. I found this part of the article to be extremely helpful because the authors broke down the types of structure of the exchange of shares in such a way that even though I was never exposed to these different structures, I was able to understand the key difference between the two. I believe this section of the article could provide valuable insight to mangers in order to help decided what structure they should take if they chose to finance using stock. This article also provides helpful questions for both the acquirer and the seller to consider about the use of stocks or cash. The article provided three questions for the acquirer, two that would help them choose between cash or stock, and one to help them choose between

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