When deciding what type of considerations to use when buying a company It will be somewhere on the spectrum between all shares and all cash If go with all cash first of all, that's the most common type of consideration for acquisition of non listed entities If we're looking at a private company, then the selling shareholders don't want to become shareholders in a big public listed company Or alternatively, if we're a private company buying another private company, then those selling shareholders can not become shareholders in the combined private company Alternatively, let's go with all shares. If we're looking at all shares, the target shareholders here become part of the combined business But most deals are a combination of the two So question for you, if we were going to pay with shares or if we were going to pay with cash Which one do we think we'll have to pay more with? Well the answer is with shares, because the selling shareholders who are receiving the new shares are taking on equity risk The share price could go up or down, they get a bit scared by this They think, I think you're going to have to pay me a bit more Maybe 3-5% more than if it was with cash Second question, which is better with the buyers to pay with cash or shares? Well firstly if they pay with cash, they get to pay less 3-5% less Secondly, if you pay with cash, there's no dilution to your ownership And thirdly, cash is cheaper We can go to the bank, we can borrow cash, take on some debt and that's got a low cost of debt If we pay with shares, that has a very expensive cost of equity So normally, how do we pay? We use excess cash first, then we go to the bank and we borrow some cash (pay with that) And lastly if we have to, we use shares to pay the rest