At this stage, there are two common payment methods: share-based payment and cash payment. There are also three payment combinations under the combination of the two methods, namely all-cash payment, all-share payment, and partial-cash-part-share hybrid payment.

In the course of an M&A transaction, parties to the transaction usually consider the following situations around the means of payment.

(1) Depending on the size of the transaction, the payment method used in the transaction will also be different. In general, small-scale M&A transactions often use cash payments, while large-scale M&A transactions tend to use share-based or hybrid payments.

(2) The shareholding structure of the listed company will also have an impact on the payment method, and if the controlling shareholder holds a high proportion of shares, it will prefer to use share-based payment.

(3) When the valuation of the company is high, the listed company tends to use the share-based payment method, on the contrary, the shareholders of the target company are more inclined to pay in cash.

(4) In the case of insufficient funds and weak financing ability, listed companies will give priority to share-based payment.

(5) The preferences for payment means will be different depending on the identity and needs of the counterparties. For example, the actual controller of the target company prefers share-based payments, while some investors and investment institutions prefer cash payments to facilitate short-term cash-outs.

(6) In order to lock in the counterparty, develop long-term interest relationships, and help achieve the promised performance, the share-based payment method is a better choice.

(7) The choice of payment method is also affected by the nature of the underlying asset. The CSRC stipulates that loss-making assets are not allowed to use share-based payment for M&A transactions, so the use of equity payment is conditionally restricted.

(8) The tax burden should also be taken into account when carrying out M&A transactions, and some reasonable tax restructuring policies can be adopted to achieve tax deferral when the shares account for a large proportion of payments.

(9) Cash transactions do not need to be reviewed by the CSRC and take a short period of time, while equity transactions need to consider the possibility of passing the review and the time cost. In addition, different means of payment will have different impacts on the financial status, shareholding structure, and operating conditions of listed companies.

Corporate Finance: Equity Financing× Debt Financing× IPO Listing × M&A Financing5.2.2 Payment Method Arrangement is in hand, please wait a while,

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