The sources that are considered for financing M&A in

the Indian context are the following:

1. Internal accruals of the acquiring company that are
available in the form of liquid cash or cash
equivalents
2. Disposal of some surplus assets of the acquiring
company to raise cash
3. Raise cash by way of equity or debt from promoters
or promoting entities .In some cases ,the acquiring
company does not raise the capital on its balance
sheet. Instead ,it invites the promoters to jointly bid
for the acquisitions. Such co investors are called
persons acting in concert.
4. Raising of long term debt from banks or from capital
market by the acquiring company on its own
balance sheet.
5. Raising equity from the capital market by the
acquiring company.
6. Raising of debt capital on a different balance sheet
other than that of the acquiring company.
Deal Structuring
Broad framework of execution of the transaction
with respect to the transferors and the transferees.
Incorporates the valuation that is agreed by both the
parties
Culmination of the efforts of the investment bank in
transaction advisory and negotiation
Usually documented in the form of a MOU or LOI
or term sheet ,as the case may be.
Forms the basis for transaction documentation
drafted by the lawyers at a later date.
General features of a deal structure
The deal structure addresses the following aspects:
Total deal size based on the valuation agreed to
between both parties
Share swap ratio arrived at in the case of a merger
Assets to be taken over at book value or as per the
revaluation carried out. If revaluation is already
completed ,these values can be incorporated
Liabilities to be taken over if any, as per the book
values or settlements to be reached with creditors.

General features of a deal structure(contd)
Exclusions from the list of assets and liabilities to be
taken over
Purchase consideration payable in the case of a
buyout or acquisition
Mode of settlement of purchase consideration: Cash
component,stock component and debt component
Extent of shareholding, in case of an acquisition
Price per share for fresh issue of shares


General features of a deal structure (contd)
Identification of sellers in the case of a share
purchase
Identification of acquirers and extent of acquisition
by each in case of a consortium
Time frame for the acquisition, staggered acquisition
if any, milestone payments if any, payment
mechanisms etc.
Earn out contingent payment model if any, which is
structured so that a part of the purchase price is
contingent upon the target companys achievement
of business volumes, gross revenues post acquisition


General features of a deal structure (contd)
Broad management structure and incentive plan or
stock options for the key managers
Main conditions precedent to acquisition or buyout