The external financing channels of M&A mainly include debt financing, equity financing and hybrid financing instrument financing, and the following is a detailed analysis of these three financing methods.

◆ Debt financing

There are two main types of debt financing, one is senior debt financing and the other is subordinate debt financing, as shown in Table 5-4.

◆ Equity financing

Equity financing here refers to equity financing, which can be divided into two methods, one is common stock financing and the other is preferred equity financing, as shown in Table 5-5.

◆ Hybrid financing instruments

In addition to debt financing and equity financing, enterprises will also use some hybrid financing tools for acquisition financing, which often have the characteristics of equity financing and debt financing, including the following tools.

(1) Convertible securities.

There are two main types of convertible securities, one is a convertible bond and the other is a convertible preferred stock, which is a hybrid financing instrument that integrates equity and liabilities, and the holder can convert the debt into common shares at a certain price within a certain period of time.

(2) Warrants.

Warrants are long-term options issued by a company that allow the holder to purchase a predetermined number of shares at a certain price, and are considered as a substitute for preferred or common stock, and are popular with acquirers and investors. Companies tend to issue warrants at the same time as long-term bonds. For enterprises, warrants have two major advantages: first, warrants can prevent the shareholders of the acquired enterprise from becoming ordinary shareholders in the early stage of merger and acquisition, and can ensure that the shareholders of the merged enterprise have the right to obtain information and participate in shareholders' meetings; Second, warrants will not cause significant damage to the rights and interests of the existing shareholders of the target company. The disadvantage of financing through the issuance of warrants is that if the share price of the common shares is much higher than the agreed price of the warrants, the issuer will have to suffer certain losses.

Corporate Finance: Equity Financing× Debt Financing× IPO Listing × M&A Financing5.3.2 External Financing Channels are in hand, please wait a moment,

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