Deal structure: Difference between revisions
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A '''deal structure''' is a set of conditions. These conditions depend not only on the parties to the transaction, but also on external conditions (e.g. tax or legal) <ref>A.Bullen. 2011. p.275</ref>. In order for the transaction to be carried out efficiently, you should be familiar with applicable tax and civil law. | A '''deal structure''' is a set of conditions. These conditions depend not only on the parties to the transaction, but also on external conditions (e.g. tax or legal) <ref>A.Bullen. 2011. p.275</ref>. In order for the transaction to be carried out efficiently, you should be familiar with applicable tax and civil law. | ||
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'''The commercial transaction''' is an interaction between a buyer and a seller. It involves the exchange between an [[enterprise]] and a second enterprise or a people. It is an exchange of products, services, [[money]] and [[information]]. Transaction parties can negotiate individual transaction terms. This is not only the amount of payment, but also the [[method]] and date of payment <ref>P.A. Bernstein, E.Newcomer. 2009. p.1-2</ref>. | '''The commercial transaction''' is an interaction between a buyer and a seller. It involves the exchange between an [[enterprise]] and a second enterprise or a people. It is an exchange of products, services, [[money]] and [[information]]. Transaction parties can negotiate individual transaction terms. This is not only the amount of payment, but also the [[method]] and date of payment <ref>P.A. Bernstein, E.Newcomer. 2009. p.1-2</ref>. | ||
== Transaction structure for mergers and acquisitions== | ==Transaction structure for mergers and acquisitions== | ||
Enterprises operate in various areas that do not compete with each other. If one of these areas becomes less profitable, you can always develop the other. This is a very good solution if the company is very keen on any changes in its [[environment]] - near or far. One of the methods of enterprise development is the acquisition or [[merger]] with another [[company]] with a similar profile of activity. Enterprise development is a long-term [[process]], but through [[mergers and acquisitions]] it can take place much faster and enables the company to start new [[investments]], which in the future can bring a large profit. Thanks to the "merger", the company will not only gain the assets of the other party, but also gain the area of activity, and thus customers<ref>G.Yates, M.Hinchliffe. 2010. p.47-49</ref>. | Enterprises operate in various areas that do not compete with each other. If one of these areas becomes less profitable, you can always develop the other. This is a very good solution if the company is very keen on any changes in its [[environment]] - near or far. One of the methods of enterprise development is the acquisition or [[merger]] with another [[company]] with a similar profile of activity. Enterprise development is a long-term [[process]], but through [[mergers and acquisitions]] it can take place much faster and enables the company to start new [[investments]], which in the future can bring a large profit. Thanks to the "merger", the company will not only gain the assets of the other party, but also gain the area of activity, and thus customers<ref>G.Yates, M.Hinchliffe. 2010. p.47-49</ref>. | ||
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[[Internet]] banking is a [[service]] that supports but also facilitates the handling of bank accounts of account holders. Banks address their offer not only to mass clients but also to individual clients. | [[Internet]] banking is a [[service]] that supports but also facilitates the handling of bank accounts of account holders. Banks address their offer not only to mass clients but also to individual clients. | ||
==Examples of Deal structure== | |||
* '''Asset Purchase''': In an asset purchase, one party takes over the assets of another party such as property, equipment, or intellectual property. This type of deal structure is often used when one company wants to purchase the assets of another company but doesn't want to assume the liability of the other company. | |||
* '''Stock Purchase''': In a stock purchase, one party purchases the shares of another company. This is a popular deal structure for mergers and acquisitions, as it allows the buyer to assume control over the target company without assuming its liabilities. | |||
* '''Joint Venture''': In a [[joint venture]], two parties come together to pursue a common goal. Each party contributes capital and resources to the venture, and they share the profits and losses. This type of deal structure is often used when two companies want to collaborate on a [[project]] but maintain their separate identities. | |||
* '''Debt [[Financing]]''': In debt financing, one party borrows money from another party in exchange for an obligation to repay the loan with [[interest]]. This is a popular deal structure for businesses that [[need]] to raise capital quickly and don't want to dilute their ownership by issuing shares. | |||
* '''Lease''': In a lease, one party rents an asset from another party for an agreed-upon period of time. This type of deal structure is often used when a company [[needs]] to use an asset but doesn't want to buy it outright. | |||
==Advantages of Deal structure== | |||
* A well-structured deal can help to facilitate and expedite the process of buying and selling goods and services. It can help to ensure that all parties are satisfied with the terms and conditions of the transaction, and that it is carried out in a fair and equitable manner. | |||
* A deal structure can provide a clear framework for [[negotiation]] and a comprehensive understanding of the legal and financial implications of the deal. It can help to ensure that all parties are aware of the risks and rewards associated with the transaction and that the transaction is in compliance with applicable laws and regulations. | |||
* A deal structure can provide a simple, streamlined process for documenting the terms and conditions of the deal, and can help to ensure that all parties are aware of their rights and obligations. | |||
* A deal structure can also help to protect the interests of all parties by providing legal recourse should any disputes arise. A well-structured deal can help to ensure that all parties are aware of their rights and obligations, and that any disputes are resolved quickly and efficiently. | |||
==Limitations of Deal structure== | |||
* Deal structures can be limited by the [[availability of resources]], such as capital or personnel. In addition, the structure may be restricted by the applicable tax and civil laws. | |||
* Another limitation may be the different interests of the parties involved. The parties may have different [[goals and objectives]], which can lead to disagreements and delays in the deal structure. | |||
* The availability of financing may also be a limitation. If the deal structure requires a large sum of money, the parties might not have access to the necessary financing. | |||
* The parties involved may also have different levels of experience in deal structuring, which can lead to misunderstandings and difficulties in reaching an agreement. | |||
* Finally, the [[external environment]] can also be a limitation. [[Market]] volatility or changes in regulations can impact the deal structure and make it difficult to reach an agreement. | |||
==Other approaches related to Deal structure== | |||
A deal structure defines the conditions and arrangements between parties, as well as external conditions, that must be met for a commercial transaction to take place. Here are some other approaches related to deal structure: | |||
* '''Due Diligence''': This is the process of investigating, assessing and verifying the financial, legal, and other aspects of a potential transaction. [[Due diligence]] is essential for a successful deal structure, as it helps to identify any risks associated with the transaction. | |||
* '''Negotiation''': Negotiation is a crucial component of the deal structure and involves the parties coming to an agreement on the terms of the deal. This can include the [[price]], timeline, payment terms and any other relevant details. | |||
* '''Contract''': A contract is an agreement between two or more parties that sets out the terms and conditions of the deal. It is important that the contract is drafted in a way that is legally binding and protects the interests of all parties involved. | |||
In conclusion, a deal structure is a set of conditions that must be met for a commercial transaction to take place. Other approaches related to deal structure include due diligence, negotiation and contracts, which are all essential for ensuring a successful transaction. | |||
==Footnotes== | ==Footnotes== | ||
<references/> | <references/> | ||
{{infobox5|list1={{i5link|a=[[Tri party agreement]]}} — {{i5link|a=[[Deal flow]]}} — {{i5link|a=[[Musharaka]]}} — {{i5link|a=[[Anonymous Trading]]}} — {{i5link|a=[[Bridge Bank]]}} — {{i5link|a=[[Mudaraba]]}} — {{i5link|a=[[Capital restructuring]]}} — {{i5link|a=[[Selling Group]]}} — {{i5link|a=[[Collateral management]]}} }} | |||
==References== | ==References== | ||
Latest revision as of 19:44, 17 November 2023
A deal structure is a set of conditions. These conditions depend not only on the parties to the transaction, but also on external conditions (e.g. tax or legal) [1]. In order for the transaction to be carried out efficiently, you should be familiar with applicable tax and civil law.
A transaction is action that leads to the intended goals. Related activities are aimed at exchanging goods, increasing profit or establishing cooperation.
Types of transaction
- one-sided transaction
- multi-sided transaction
- commercial transaction
The commercial transaction is an interaction between a buyer and a seller. It involves the exchange between an enterprise and a second enterprise or a people. It is an exchange of products, services, money and information. Transaction parties can negotiate individual transaction terms. This is not only the amount of payment, but also the method and date of payment [2].
Transaction structure for mergers and acquisitions
Enterprises operate in various areas that do not compete with each other. If one of these areas becomes less profitable, you can always develop the other. This is a very good solution if the company is very keen on any changes in its environment - near or far. One of the methods of enterprise development is the acquisition or merger with another company with a similar profile of activity. Enterprise development is a long-term process, but through mergers and acquisitions it can take place much faster and enables the company to start new investments, which in the future can bring a large profit. Thanks to the "merger", the company will not only gain the assets of the other party, but also gain the area of activity, and thus customers[3].
In order for such transactions to comply with all regulations, the "deal structure" must be established. A sales schedule should be developed and financial and economic analysis carried out. Negotiations are an important step in creating the structure. Enterprises can carry out mergers or acquisitions to form their own teams or hire specialists to take care of the entire procedure.
Banking transaction
A banking transaction is a set of operations that is commonly called a bank transfer. Thanks to this action, we can quickly make payment of obligations or receive our debts throughout the country and around the world. For a transaction to be considered successful, money must be taken from one account and posted to another[4].
Stages of a banking transaction:
- start
- implementation
- closures.
Internet banking is a service that supports but also facilitates the handling of bank accounts of account holders. Banks address their offer not only to mass clients but also to individual clients.
Examples of Deal structure
- Asset Purchase: In an asset purchase, one party takes over the assets of another party such as property, equipment, or intellectual property. This type of deal structure is often used when one company wants to purchase the assets of another company but doesn't want to assume the liability of the other company.
- Stock Purchase: In a stock purchase, one party purchases the shares of another company. This is a popular deal structure for mergers and acquisitions, as it allows the buyer to assume control over the target company without assuming its liabilities.
- Joint Venture: In a joint venture, two parties come together to pursue a common goal. Each party contributes capital and resources to the venture, and they share the profits and losses. This type of deal structure is often used when two companies want to collaborate on a project but maintain their separate identities.
- Debt Financing: In debt financing, one party borrows money from another party in exchange for an obligation to repay the loan with interest. This is a popular deal structure for businesses that need to raise capital quickly and don't want to dilute their ownership by issuing shares.
- Lease: In a lease, one party rents an asset from another party for an agreed-upon period of time. This type of deal structure is often used when a company needs to use an asset but doesn't want to buy it outright.
Advantages of Deal structure
- A well-structured deal can help to facilitate and expedite the process of buying and selling goods and services. It can help to ensure that all parties are satisfied with the terms and conditions of the transaction, and that it is carried out in a fair and equitable manner.
- A deal structure can provide a clear framework for negotiation and a comprehensive understanding of the legal and financial implications of the deal. It can help to ensure that all parties are aware of the risks and rewards associated with the transaction and that the transaction is in compliance with applicable laws and regulations.
- A deal structure can provide a simple, streamlined process for documenting the terms and conditions of the deal, and can help to ensure that all parties are aware of their rights and obligations.
- A deal structure can also help to protect the interests of all parties by providing legal recourse should any disputes arise. A well-structured deal can help to ensure that all parties are aware of their rights and obligations, and that any disputes are resolved quickly and efficiently.
Limitations of Deal structure
- Deal structures can be limited by the availability of resources, such as capital or personnel. In addition, the structure may be restricted by the applicable tax and civil laws.
- Another limitation may be the different interests of the parties involved. The parties may have different goals and objectives, which can lead to disagreements and delays in the deal structure.
- The availability of financing may also be a limitation. If the deal structure requires a large sum of money, the parties might not have access to the necessary financing.
- The parties involved may also have different levels of experience in deal structuring, which can lead to misunderstandings and difficulties in reaching an agreement.
- Finally, the external environment can also be a limitation. Market volatility or changes in regulations can impact the deal structure and make it difficult to reach an agreement.
A deal structure defines the conditions and arrangements between parties, as well as external conditions, that must be met for a commercial transaction to take place. Here are some other approaches related to deal structure:
- Due Diligence: This is the process of investigating, assessing and verifying the financial, legal, and other aspects of a potential transaction. Due diligence is essential for a successful deal structure, as it helps to identify any risks associated with the transaction.
- Negotiation: Negotiation is a crucial component of the deal structure and involves the parties coming to an agreement on the terms of the deal. This can include the price, timeline, payment terms and any other relevant details.
- Contract: A contract is an agreement between two or more parties that sets out the terms and conditions of the deal. It is important that the contract is drafted in a way that is legally binding and protects the interests of all parties involved.
In conclusion, a deal structure is a set of conditions that must be met for a commercial transaction to take place. Other approaches related to deal structure include due diligence, negotiation and contracts, which are all essential for ensuring a successful transaction.
Footnotes
| Deal structure — recommended articles |
| Tri party agreement — Deal flow — Musharaka — Anonymous Trading — Bridge Bank — Mudaraba — Capital restructuring — Selling Group — Collateral management |
References
- Bernstein P.A., Newcomer E. (2009)., Principles of transaction processing, Morgan Kaufmann.
- Bullen A. (2011)., Arm’s length transaction structures, IBFD.
- Wandhofer R. (2014).,Transaction banking and the impact of regulatory change.
- Yates G., Hinchliffe M. (2010).,A practical guide to private equity transactions, Cambridge.
Author: Klaudia Broś
