In the complicated world of business, most corporations diversify by buying into other corporations whether it is related to their core business or not. It is simply a way to invest their cash in something that could prove to be valuable today or in the future. A corporation wanting to buy shares into another corporation can easily do so by following certain guidelines and by simply presenting the cash to the selling corporation. Like in any investment portfolio, the more shares a corporation buys from another corporation will mean the more control that corporation will have over the other corporation. This all seems so complex but it is rather simple in reality. Here are some steps that your corporation will want to take in order to buy and own shares in another corporation.
Organize your investment plan. Any corporation looking to diversify their investments or poised for a hostile takeover of a competitor will want to organize and prepare their investment plan prior to making the purchases. Alright, the investment plan should inculcate the total budget for investment. Obviously, this would require knowing the cash on hand or liquidity of your corporation. This will determine that total cash you are willing to invest. Aside from this, you will want to determine the corporations that you are interested in. This can be a corporation that is a direct competitor or this can be a corporation in another industry. Make sure to include the profitability of such an investment and the risks attached to it. Thorough research and due diligence will be needed at this point. This investment plan will give you a bird’s eye view of the investment and what it will bring to table if made.
Hire professionals. When engaging in an investment in another corporation, you will want to have a team of experienced professionals handling this for you. First off, you will need the services of an accountant to help you determine the numbers including cash, financial projections, and risk. You will need the services of a lawyer experienced in corporate law as well to handle the legalities. Finally, you will definitely need a financial expert to help you see all the angles of the buyout. If you are purchasing public shares of a corporation, then you will need to have a stock broker to initiate and supervise the transaction.
ReplyDeleteMeet with the corporation. Before going through with the purchase, it would be a great idea to meet with the head honchos of the corporation to discuss your intent and the deal they can give you. A lot of negotiation will be involved here. Make sure to bring your team of professionals to help you through it.
Due diligence. Before making the final decision on investing in a corporation, you will want to ensure that your figures are correct. This will mean checking their books and financial liabilities first. Have an accountant and auditor look over the books to determine if the figures are correct and the investment is feasible.
Once the deal is done, make sure to put it into writing by drafting and signing legal contract regarding the transaction. Both parties can use these contracts for legal action in the future if certain circumstances warrant it. Make sure to get your shares in paper to serve as security and evidence that your corporation owns shares in the other corporation