How do I finance an acquisition?

Question

I am working on this project for my financial management course (killer course). I am stuck. Let's say my company is Merck and Co Inc and the company I want to acquire (Wyeth) will cost me about 36 billion dollars. I know I can issue debt (bonds), issue stock, or both. I dont understand how I would calculate-determine what I can issue in debt (bonds) and what I can issue in stock based on the data from www.finance.yahoo.com (which has been very helpful); I believe I have to look at common and preferred stock (maybe even beta), but I am not sure what other information I need to look at in order to determine how many bonds and how much stock I can issue. Some examples might be helpful. Or maybe even some webistes which simplify such complicated problems for a simpleton like me :)

Answer 1

first, has your board of directors approved the intended acquisition? second, have you contacted the company to be acquired and are they ok'ing the deal, or is it to be a hostile takeover? also, how do their shareholders feel about a possible acquisition or merger ? third, what is the acquisition's fully diluted per share value ? next, how many "golden parachutes" would you have to pay to directors and executives of the acquired company if you are successful ? and last and most important, does the to be acquired company have any "poison pill" defense mechanism in place to try and prevent acquisitions? When you have all these answers, then you have a rough idea of how much per share you might have to pay in a tender offer. Also remember, there may be another company also trying to acquire the target, and a bidding war can drive the price even higher.