In an M&A (Mergers and Acquisitions) context, the terms "cash in" and "cash out" refer to the cash inflow and outflow related to the transaction.
"Cash in" in M&A can refer to the inflow of cash, resulting from the sale of a company or a part of it, or the sale of assets. We can also interpret the term as a primary contribution/issue, as it means the creation of securities representing the share capital.
On the other hand, "cash out" refers to the outflow of cash. The term is used for operations in which no shares/quotas are issued, in which the trading (which does not involve the company, but usually only the shareholders or quotaholders), is done with the already existing shares/quotas and is also known as secondary contribution.
The two types of transaction can also be smoothly combined.
These terms are important in an M&A transaction, as they can significantly affect the company's cash flow and capitalization structure. Careful cash in and cash out analysis can help ensure that the M&A transaction is successful and beneficial to all parties involved, as, can help ensure that the transaction is successful and beneficial to all parties involved in several ways. Some examples include:
Financial Viability: A careful cash in and cash out analysis can help determine whether the transaction is financially viable and whether the acquiring company will have sufficient cash flow to pay the purchase price and other expenses associated with the transaction.
Risks and opportunities: Cash in and cash out analysis can help identify the risks and opportunities associated with the transaction, such as potential hidden costs or operational synergies that can be exploited after the transaction is completed.
Financing Structure: Cash in and cash out analysis can also help determine the best financing structure for the transaction, such as using debt or equity to finance the transaction. This can affect the interest rate and payment terms, as well as the capitalization structure of the acquiring company.
Impact on company valuation: Cash in and cash out analysis can have a significant impact on company valuation, since cash flow is an important factor in determining a company's value.