My dad works for a Limited company he has a chance of purchasing some shares. He has heard a strong rumour that the company might merge or be taken over by another larger Limited company. The amount of shares is small fry, to some that he would invest but to him its a lot. Would he double the amount invested if his firm was taken over. How does it work ? Is it worth a punt ? ta
0
Comments
If it is a PLC you can get some idea of the present value per share from the financial pages of the papers. If it is a private company he might want to look at the last few years accounts which you can get from Companies House via the website for a fee.
http://www.companieshouse.gov.uk/
Why do you think your dad has been made this offer? Is he a long term employee and they are trying to reward him or is the firm in trouble and seeking more capital to keep it going until someone buys it at a knockdown price?
As Johnny Nash sung: There are more questions than answers!
If he is right then there might not be much goodwill to be sold to prospective new owners which means he may well not make too much on any investment but he really needs to look at some accounts by the sound of it.
Can't give you any solid advice, shares go up, shares go down, and all-share offers at buyouts can come at below market value as well as above.
All i would say is tell him not to invest a penny that he can't afford to lose. Like companies, individuals have different levels of risk appetite as well. If he has spare cash and fancies a gamble, get an independant financial advisor to have a little look at the companies published figures. If it looks above board, then go ahead.
However, if his savings are important to him, and will be important later in life, don't risk any of it on a punt.
He might then get a better "feel" for whether it's worthwhile doing or not.
I reiterate though (and AFKA has said the same) he needs to look at some accounts before investing, particularly if the amount of money is a lot to him.
There are many variables, but if he is going to buy into a company and invest in it then he needs first to talk to a properly accedited advisor/accountant. I personally would insist on seeing the last few year's or so financial records and ask for a business plan and to overview the prospects for the next year of trading etc and any guarantees and promises are in writing.
As to how much he would make if the company was taken over...there is no set figure, but by law every share is worth the same - i.e. he must be offered exactly what other shareholders are being offered and when in the invent of a takeover or the sale of his stake that any profit he makes is liable to Capital Gains Tax. Currently you can make £9,200 per annum before CGT kicks in but after that he'll be taxed - the rate goes down to 18% from next year (I think??).
Anyway, get specialist advice in - someone to look at the books and advise him what the liabilities are.