The total share capital of Company A is 6,543,800+shares, and the market value is 6,543,800+0 yuan/share, so the total market value of Company A is 6,543,800+shares.

Company B is smaller, with 200,000 shares 10 yuan, and the total market value of Company B is 2 million.

Assume that the net profit per share of both companies is 1 yuan/share (both are 10 times PE), that is, the total net profit of Company A is 1 10,000, and that of Company B is 200,000.

If company A buys company B in cash, it usually needs a certain premium to make a successful tender offer. Since the market value of Company B is 20 million, only the shareholders of Company B have been paid more than 20 million in total to be successful, and the actual acquisition may cost 30 million.

Then, after the completion of the merger, Company A still maintains 654.38+00,000 shares, but after the merger, the total net profit of Company A has increased to 654.38+02,000 yuan, and the net profit per share has increased to 654.38+0.2 yuan, so the price-earnings ratio of Company A has dropped from 654.38+00 times to more than 8 times. Therefore, although Company A has paid a lot of money for the merger, its share price should be expected to rise.

But if the equity payment is enough, the situation will be different.

The usual practice is to convert all the shares held by the shareholders of Company B into the shares of Company A. After the merger, the total share capital of Company A should be increased from 6,543.8+0,000 shares to 6,543.8+0,000 shares, and the earnings per share is still in the same place, which is still 654.38+0 yuan/share, but Company B does not exist, and the shares held by the original shareholders of Company B are 654.38+0: 654.33.

From this point of view, cash mergers and acquisitions seem to be better, so the market is usually more optimistic about cash payment.

====

But the problem is not absolute, because Company A and Company B will have various business situations, assuming as follows:

1, the situation is still the same as the above assumption, but company A has limited liquidity and bank credit, and cannot raise enough funds for cash merger and acquisition, so it has to pay equity;

2. Even if you have the financial resources, taking into account the factors such as tax, bank loan interest, future cooperation effect of 1+ 1 > 2, then equity merger and acquisition is very suitable;

3. If the market value of Company A is100000, and the market value of Company B is 2 million, but the profitability of Company A is not five times that of Company B, and there is the possibility of equity merger, then after the implementation of the merger, Company A can improve its profitability per share, and equity merger will also have very good expectations.

4. Even if the two companies pay equity in M&A fairly, there is a fact that the expectation of future growth of Company B is better, so the future growth of Company A will be improved after M&A equity payment, so the equity payment is also better.

5. If Company B is a loss-making enterprise, but after the merger, Company A is confident to turn losses into profits, then the low-cost cash merger is definitely the most suitable, and the situation is suitable, with good expectations in the future, even if the full amount is paid temporarily.

In short, the mode of M&A is determined by many factors, not necessarily which is stronger or weaker, but the mode of cash payment is more positive and usually reflected in the expectation of stock price rise in time, so it is more favored by shareholders.