A bought deal is a type of securities offering in which the underwriter commits to buying the entire offering from the issuer company before a preliminary prospectus is filed. A bought deal eliminates the financing risk faced by the issuer company. In a bought deal, the underwriter purchases the entire offering from the issuer company.
What is a bought deal IPO?
In a bought deal, the investment bank or underwriter gives an assurance of buying the entire offering from the issuing company before a preliminary prospectus is filed. A bought-deal also gives an assurance to the issuer that the amount intended to be generated through an IPO will be realized. How does a Bought Deal Work?
What are the benefits of buying out deals?
Freedom – The bought out deals offer freedom for promoters to set a realistic price & negotiate the same with the sponsor. 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
Who is involved in a bought out deal?
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 Outright sale – There is an outright sale of a chunk of equity shares to a single sponsor or a lead sponsor
