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external financing alternatives

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Having previously identified the location of its Greenfield investment, Acme, a multi-billion public MNE that is incorporated in the U.S., must next obtain external financing for its proposed overseas production facility. It has been estimated that the acquisition will cost $500M and all funds will be secured in the U.S. Your job is to explain to this committee some of the financial aspects of this acquisition.

Deliverable: At the next steering committee meeting, you will provide a detailed presentation of the characteristics of the various external financing alternatives, including the advantages and disadvantages of each. Your report should conclude with a recommendation of which alternative (or combination of alternatives) should be used to finance the overseas investment.

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Acme can use a wide range of financing options to fund this acquisition. Let us evaluate the various options one by one.

The first option will be raising funds via initial public offering. Acme can raise funds from the general public or public investors by issuing shares via IPO. There are several advantages of IPO. First of all, the company will be able to secure large funding by going public. Further, subsequent fund raising activities will become easier as company can easily raise funds in the future via rights issue. Another advantage of IPO will be that Acme will enhance its reputation by listing itself on the stock exchange and will be reap advantage of attractive market valuations, if the market conditions are good and the company is performing well.

However, there are ...

Solution Summary

What are some external financing alternatives for Acme's Greenfield production facility?

$2.19