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Where do companies get the money to buy other companies?
This question popped in my head the other day. What I mean is, where do they keep the money for buying? Is it in a bank account taken from their profits? Does the CEO pay for it? Do they keep it in a fund or something? I’m specifically talking about buying companies, not mergers.
9 Answers
- Steve DLv 73 years agoFavorite Answer
Most buyouts are leveraged, meaning they borrow the money against the assets of the company being bought, Some of the money might also come from stock swaps where, instead of cash the stockholders get a certain number of shares (or a piece of one depending upon the value of the shares.
- Casey YLv 73 years ago
A variety of different ways. Could be cash on hand, could be borrowed from a bank, or they could simply offer their own stock in exchange for the other stock.
- Anonymous3 years ago
They take a loan from a corporate bank
Source(s): My husband is a senior credit manager who gives them loans - How do you think about the answers? You can sign in to vote the answer.
- WhoLv 73 years ago
they have money in the bank
If that aint enough they sell shares or borrow it
Or they dont "buy" it at all (with money) - they give shareholders in the company they want in exchange for the shares in their company - (sometimes together with a bit of cash)
when you own those shares and not the previous shareholder then you own the company
So you can "buy" another company without paying any cash money for it at all
- JazSincLv 73 years ago
Borrow it. Then afterwards, load the debt onto what they bought.
See "Toys 'R Us"
- 3 years ago
Big companies are often in huge profits. They exclaim if they don't meet the target rate of growth in an year. If u r an employee don't work too hard and break it head.
- Coffee DrinkerLv 73 years ago
They get the money the same way they get any other money - they sell goods & services to customers at a price higher than what it costs to produce the goods or provide the service, and the difference is their profit margin.
If you have a bank account and you're constantly putting money in and taking money out, but the deposits are larger than the withdraws, then the balance will grow steadily. That's what businesses do.
As companies grow and accumulate more money, they usually begin investing that money in various ways. For example a large corporation might have several billion dollars of what they call "Cash" - but they don't really have a vault full of cash $100 bills. They will spread that money out and invest it in low risk items such as highly rated bonds, money market accounts, or other things which provide a bit of return but very low risk. These types of investments are generally very liquid - meaning its easy to sell the investment and have money in a bank account very quickly.