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by boeingUH60 1361 days ago
I was mind-blown when I found that you could do this...effectively buying a company with that company's own money.

Michael Dell acquired EMC that way, and with some financial engineering, came out ahead with a few ten billions.

https://www.forbes.com/sites/antoinegara/2021/08/03/deal-of-...

1 comments

It doesn't matter. At the end of the day it's all your money anyway, just in a different place. The following is a simplification, but the concept should (I hope) be clear.

Let's say you want to buy an asset that can generate revenue. Let's also assume you need to borrow the amount, that you don't have it lying around.

You could take out a loan, and back it with some other asset, like your car.

Or you can get the company to take out a loan.

If the Company makes money, that money goes to servicing the debt. Either way its "your money" servicing the debt.

There are reasons to select one approach over the other, but putting the loan in the company name is often better for tax, and personal asset protection, reasons.

So yes, you buy the company with its future profits, but ultimately that's why you buy it in the first place.