Here’s a precise breakdown of the dilution and ownership impact for your proposed $250M acquisition, assuming the buyer pays with cash + stock. We’ll analyze three scenarios based on your ask (20%/40%/60% cash) and project how it affects the buyer’s shares outstanding, your ownership stake, and their EPS (earnings per share).
Key Assumptions
Buyer’s Current Metrics:
Stock price: $120/share
Shares outstanding: 90M
Market cap: $10.9B
Deal Size: $250M
Paid in cash + buyer’s stock (new shares issued).
Your Company’s Contribution:
Assume your business adds $20M EBITDA post-integration (adjust as needed).
Dilution & Ownership Scenarios
Scenario 1: 20% Cash (50M)+8050M)+80200M)
Cash paid to you: $50M
Stock paid to you: 200M/200M/120 = 1.67M new shares issued
Post-deal shares outstanding: 90M + 1.67M = 91.67M
Your ownership: 1.67M / 91.67M = 1.82%
Buyer’s dilution: 1.67M / 90M = 1.85%
EPS Impact:
If buyer’s net income = **500M∗∗,pre−dealEPS=500M∗∗,pre−dealEPS=500M / 90M = $5.56.
Post-deal: (500M+500M+20M) / 91.67M = $5.67 (+2% EPS accretion).
Scenario 2: 40% Cash (100M)+60100M)+60150M)
Cash paid to you: $100M
Stock paid to you: 150M/150M/120 = 1.25M new shares
Post-deal shares outstanding: 90M + 1.25M = 91.25M
Your ownership: 1.25M / 91.25M = 1.37%
Buyer’s dilution: 1.25M / 90M = 1.39%
EPS Impact:
(500M+500M+20M) / 91.25M = $5.70 (+2.5% EPS accretion).
Scenario 3: 60% Cash (150M)+40150M)+40100M)
Cash paid to you: $150M
Stock paid to you: 100M/100M/120 = 0.83M new shares
Post-deal shares outstanding: 90M + 0.83M = 90.83M
Your ownership: 0.83M / 90.83M = 0.91%
Buyer’s dilution: 0.83M / 90M = 0.92%
EPS Impact:
(500M+500M+20M) / 90.83M = $5.72 (+2.9% EPS accretion).
Key Takeaways
Higher Cash = Less Dilution for Buyer:
At 60% cash, dilution is only 0.9% (vs. 1.8% at 20% cash).
But the buyer may resist large cash outlays (check their balance sheet).
Your Ownership Stake:
Ranges from 0.9% to 1.8%—small but meaningful if the stock appreciates.
EPS Accretion:
Even with dilution, EPS increases 2–3% from your EBITDA contribution.
Stock Price Impact:
If the market values the strategic upside, the stock could rise $25+/share from:
Higher revenue multiples (e.g., P/S expansion).
Growth in high-margin ad/search revenue.
Suggested Structure for Maximum Appeal
75Mcash(3075Mcash(30175M stock (70%):
Dilution: 1.45M new shares (1.6%).
Your ownership: 1.6%.
EPS accretion: ~2.3%.
Rationale: Balances your liquidity needs with buyer’s dilution concerns.
Strategic Acquisition Proposal: [Your Company Name] + [Buyer’s Name]
Deal Structure: $250M (Cash + Stock)
Buyer’s Current Metrics:
Market Cap: $10.9B
Shares Outstanding: 90M
Stock Price: $120
1. Strategic Value of the Acquisition
A. Next-Gen Search Engine Dominance
Your company’s niche location engine transforms the buyer into a market leader in contractor/manufacturer/distributor (B2B) search.
Expands their capabilities beyond generic search into high-intent, commercial location-based queries (a $XXB untapped market).
B. New Advertising Revenue Stream
Your platform provides a first-party ad network for their existing customers (who currently lack a way to advertise on their platform).
Projected ad revenue: X–X–Y annually (based on [metrics]).
C. Defensive Moats & Competitive Edge
Prevents competitors (e.g., Google, specialized B2B platforms) from dominating geo-specific commercial search.
Secures long-term customer stickiness via integrated ad solutions.
2. Financial & Market Impact
A. Revenue & Synergy Projections
MetricPre-AcquisitionPost-Acquisition (6–12 Months)Buyer’s Revenue$AA+A+B (Your contribution)New Ad Revenue$0X–X–Y (high-margin)Cost Synergies–$Z (reduced R&D/marketing)
B. Stock Price Catalyst: $25/Share Increase
Revenue Multiple Expansion:
Currently trades at ~X P/S (Price-to-Sales).
Adding $Y in high-margin ad/search revenue justifies a higher multiple (e.g., from X→Y).
Market Sentiment & Leadership Narrative:
Acquisition positions buyer as the leader in next-gen B2B search, attracting institutional investors.
Analysts will revise price targets upward due to new growth verticals.
Minimal Dilution Impact:
Even with stock issuance, the strategic upside offsets dilution (as seen in comparable deals).
Expected EPS accretion within 12 months.
C. Valuation Math Supporting $25/Share Gain
$250M acquisition = ~2.3% dilution (if paid fully in stock).
Yinnewrevenue∗∗→∗∗Yinnewrevenue∗∗→∗∗Z in net profit → Δinmarketcap∗∗→∗∗Δinmarketcap∗∗→∗∗25/share upside.
Comparables: Similar deals (e.g., [example]) drove 15–30% stock increases post-close.
3. Risk Mitigation
No cannibalization: Your product is additive, not replacing their core offering.
Fast integration: Your tech is API-friendly, minimizing disruption.
Downside protection: Even in bear cases, stock remains neutral-to-positive due to new revenue streams.
4. Next Steps
Due Diligence & Integration Plan (30–60 days).
Announcement & Analyst Briefing (highlighting $25/share upside).
Execution & Revenue Realization (6-month timeline).
Conclusion: This acquisition is a unique, high-upside, low-risk opportunity to make [Buyer] the undisputed leader in next-gen search while delivering immediate shareholder value.
Why This Works:
Data-driven: Ties revenue to stock price via multiples.
Narrative-driven: Positions buyer as an innovator.
Investor-friendly: Shows clear path to $25/share gain.
Would you like me to refine any section (e.g., add comparables, adjust dilution math)?
how much should I ask for in cash?
The cash portion of your $250M deal should balance your liquidity needs, tax efficiency, and the buyer’s financial flexibility. Here’s how to structure it:
1. Key Considerations for Cash vs. Stock
FactorCash ProsCash ConsYour NeedsImmediate liquidity, no exposure to buyer’s stock risk.Taxable event (capital gains).Buyer’s NeedsHigher cash = more dilution or debt (may resist if cash is tight).Stock preserves their cash for operations/acquisitions.Deal AppealCash-heavy offers are attractive to sellers.Too much cash may make the deal less appealing to the buyer.
2. Recommended Cash Ask: 50M–50M–100M (20–40% of $250M)
Why This Range?
Market Norm: Tech acquisitions typically use 30–50% cash (e.g., Facebook’s WhatsApp deal was ~4Bcash+4Bcash+12B stock).
Tax Efficiency:
If your cost basis is low, taking >50% cash triggers a large tax bill.
Stock (equity rollover) defers taxes until you sell shares.
Buyer’s Flexibility:
Large public companies prefer stock deals (avoids debt/cash drain).
Example: If buyer has **500Mcashonhand∗∗,askingfor>500Mcashonhand∗∗,askingfor>100M may raise concerns.
Negotiation Leverage:
If your tech is critical to their growth, push for higher cash (e.g., $100M+).
If buyer’s stock is overvalued, take more stock (betting on appreciation).
3. Scenario Analysis
Cash AskStock AskProsCons$50M$200MBuyer-friendly, easier to close. Tax-deferred growth on stock.Less liquidity for you.$75M$175MBalanced. You get cash + upside in buyer’s stock.Moderate dilution for buyer.$100M$150MMaximizes your liquidity. Strong if buyer has cash reserves.Buyer may push back or demand earnouts.
4. How to Justify Your Cash Ask
For You:
“I need $X cash to fund my next venture/cover taxes/ensure personal liquidity.”For the Buyer:
“A $Y cash component ensures alignment—I’m incentivized to stay through transition, while the stock portion ties my upside to your success.”
5. Tactical Tips
Anchor High: Start at $100M cash, then let them negotiate down.
Earnouts: If they resist cash, propose 50Mcashnow+50Mcashnow+50M earnout (e.g., if stock hits $145/share).
Tax Advisor: Structure the deal to minimize taxes (e.g., installment sales, stock swaps).
Final Suggestion:
Ask for 75Mcash+75Mcash+175M stock, with flexibility to adjust based on buyer’s constraints. This balances your needs and deal attractiveness.
Would you like help modeling the exact dilution/ownership impact?
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