M&A Type
In the case of Lenovo to Acquire IBM Personal Computing Division, the way of M&A belongs to the horizontal merger which is a business consolidation that occurs between firms who operate in the same space, often as competitors offering the same good or service. ((I) INVESTOPEDIA) Horizontal merger can expand the scale of production, reduce production cost, eliminate competition and increase market share.
Payment Method Of M&A Cost：Cash & Securities & Assume debts
IBM sold its PC group to Lenovo in a deal valued at $1.75 billion, in return, Lenovo paid $1.25 billion for the IBM PC unit and assumed IBM’s $500 million debt. Lenovo paid roughly $650 million in cash and $600 million in securities.
M&A Method
For the stock acquisition, Lenovo issued 821 million new shares and 921.6 million non-voting shares to the IBM at the price of 2.675HKD per share. Under the deal, IBM took an 18.9 percent stake in Lenovo and become Lenovo’s second-largest shareholder.
M&A Financing & Equity Investment
Except Lenovo’s $150 million own funds, the company also accessed to financing from the international market. Lenovo successfully introduced strategic investors — three private equity firms “Texas Pacific Group”, “General Atlantic” and “New-bridge Capital LLC,” and got $350 billion strategic investment. Including the $350 billion, $150 million of which will be used as purchasing fund, the rest of about $200 million will be used as working capital. Lenovo issued 2.73 million shares of convertible securities and preferred stock, and 240 million unlisted warrants to the three investors for 1000HKD per share. Assuming that all the warrants fully exercised, the three investors will altogether hold about a 12.4% stake. In addition, three investors also absorbed 5-years $600 million loans from 20 banks to help Lenovo to acquire IBM PC. Furthermore, Lenovo got the $500 million