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Sale Price – The sale price is finalized through negotiations between the issuing company & the purchaser which is influenced by reputation of the promoters, project evaluation, prevailing market sentiment, prospects of off-loading these shares at a future date,
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Investor protection – The bought out deals facilitates better investor protection as the sponsors are rigorously evaluated and appraised by the promoters before off-loading the issue
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Parties – There are three parties involved in a bought out deal; the promoters of the company, sponsors & co-sponsors who are generally merchant bankers and investors
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Fund base – The bought out deals are fund based activities where funds of merchant bankers get locked in for at least the prescribed minimum period.
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within a time frame mutually agreed upon by the company and the sponsor. This option saves the issuing company the costs and time involved in a
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Freedom – The bought out deals offer freedom for promoters to set a realistic price & negotiate the same with the sponsor.
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Listing – The listing generally takes place at a time when company is performing well in terms of profits & liquidity.
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Quality offer – The bought out deals help in improving the quality of capital flotation and primary market offering.
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Speedy sale – The bought out deals offer a mechanism for speedy sale of securities involving lower issuing cost.
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Outright sale – There is an outright sale of a chunk of equity shares to a single sponsor or a lead sponsor
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Syndicate – The sponsor forms a syndicate for management of resources required & distribution of risk
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mandates that only private companies can choose this method of issuing securities.
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Sponsors may take control of the company as they own large number of shares.
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Sponsors can make large profits at the expense of small investors.
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Method offering securities to the public through a sponsor
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109:Learn how and when to remove this message
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