Leasing is a contract where an owner (lessor) provides an asset to a user (lessee) for a fixed period of time in exchange for regular payments (rentals). There are two main types of leases: finance leases, where the lessee is effectively the asset's owner, and operating leases, where the lessor retains ownership. Finance leases typically cover most of an asset's useful life while operating leases are shorter. Other lease types include leveraged leases which involve multiple parties, and sale and leaseback where an asset is sold and then leased back from the buyer.

1. LEASING

2. MERGERS & ACQUISITIONS DEFINITION : as a contract where a party being the owner (lessor) of an asset (leased asset) provides the asset for use by the lessee at a consideration (rentals), either fixed or dependent on any variables, for a certain period (lease period), either fixed or flexible, with an understanding that at the end of such period, the asset, subject to the embedded options of the lease, will be either returned to the lessor or disposed off as per the lessor's instructions .

3. PARTIES TO A LEASE owner called the lessor user, and the lessee “ OWNERSHIP IS NO PRE-CONDITION FOR LEASING”

4. TYPES OF LEASING FINANCE LEASE & OPERATING LEASE SINGLE INVESTOR LEASE & LEVERAGED LEASE SALE & LEASE BACK AND DIRECT LEASE DOMESTIC LEASE & INTERNATIONAL LEASE

5. Finance Lease: is a full-payout, non-cancellable agreement, in which the term of a finance lease tends to be longer, nearly covering the useful life ( physical life, technological life and product market life) of the equipment.

6. the lessor transfers to the lessee all risks and rewards incidental to ownership maintenance, taxes and insurance. The lessee purchases (option) the equipment upon lease termination at a pre-agreed amount. Lessor - Financier

7. SITUATIONS LEAD TO LEASE BEING CLASSIFIED AS FINANCIAL LEASE: There occurs transfer of ownership to the lessee by the end of the lease term The lessee has the option to purchase the asset - price < fair value at the date the option becomes exercisable ( pre-determined at inception) The lease term is for the major part of the economic life of the asset ( > 75 %) PV of the minimum lease payments= Fair Value Leased asset is of specialized nature

8. FEATURES lessee - a virtual owner lessor - no asset-based risks or asset-based rewards - only financial risks and financial rewards lease is non-cancellable they are full-payout - full repayment assured the lease is net lease – lessor ( financier) The risk the lessor takes is not asset-based risk but lessee-based risk implicit rate of return Lease period – primary, secondary, bargain renewal option, bargain buyout or purchase option

9. Operating Lease: update or replace equipment An operating lease usually results in the lowest payment of any financing alternative and is an excellent strategy for bypassing capital budgeting restraints. use equipment without ownership-return equipment at lease-end and avoid technological obsolescence

10. FEATURES short term lease – lease period being less than the economic life of the asset lease is usually cancelled at short notice lessor is responsible for insurance and maintenance of the asset lessor bears the risk of economic and functional obsolescence of the asset

11. LEVERAGED LEASE Three parties – lessor (leasing company), lessee (user) and financer. sells leases term loans Trust Popular for big-ticket assets such as aircraft, oil rigs, and railway equipment. MANUFACTURER LESSOR LESSEE FI / BANK

12. SALE AND LEASE BACK LEASE Sell and lease back Immediate cash – lease rentals Lessors : insurance companies, institutional investors, finance companies, and independent companies.

13. Domestic lease and international lease Import lease Cross border lease

14. PRIMARY AND SECONDARY LEASE PRIMARY PERIOD – Rentals cover cost and profit SECONDARY PERIOD – Nominal rent perpetual lease

15. DIRECT LEASE BIPARTITE LEASE i) Equipment supplier –cum- Lessor ii) Lessee TRIPARTITE LEASE i) Equipment supplier, Lessor and Lessee Direct Leasing -- Under direct leasing a firm acquires the use of an asset it did not previously own.

16. Benefits of Leasing Leasing offers flexibility Leasing conserves capital Leasing provides tax benefits Leasing is convenient Leasing provides a predictable budget item

17. Demerits … . No ownership Long term exposure Maintenance