RE:MBAHe's right. LEG exchanges newly issued LEG shares to Elkhorn for the purchase price and then absorbs Elkhorn's assets into LEG. Assuming Elkhorn has no or little debt, the acquisition is funded by 100% equity and adds no debt to LEG's balance sheet. LEG currently is funded - say 30% debt (for illustration) and now incorporating the acquisition it is now funded with 20%(for illustration) debt as a 100% equity funded acquisition averages down the debt % financing to the new total asses owned. Consolidated cash flows increases with the newly acquired assets and total debt / cash flow also improves. The Elkhorn shareholders now own LEG shares and can either dispose or hold them.