A few weeks ago, Rovi Corp. (NASDAQ: ROVI), a small cap public company, announced that they would acquire TiVo for $1.1 billion. The $1.1 billion purchase price consists of $277 million in cash with the remainder of the price to be paid in stock of ROVI. That's about 25% cash and 75% stock.
Stock is a very powerful and unique M&A tool for public acquirers. In fact, "About 18 percent of the [M&A] transactions in 2015 were entirely stock" and over 45% of M&A transactions included at least some stock (see below).
Stock can be a particularly useful tool to acquirers targeting companies that are relatively large. When a company doesn't have enough cash and debt financing would be difficult, stock is usually a perfect way to close a transaction.
Some of the largest M&A transactions ever completed were all or mostly stock transactions. But stock isn't only for large public companies, small companies use their stock to make acquisitions too. For example, in May approx. 90% of disclosed M&A consideration paid by micro-cap acquirers was stock.
About Acquis Capital:
Acquis Capital is a private investment firm that specializes in strategic acquisitions. Acquis Capital's mission is to facilitate strategic acquisitions that increase the book and market value of top tier public companies, with market capitalizations under $300 million. To learn more please contact us today.
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