Cash Consideration

In a cash deal, target shareholders receive a fixed amount of money for their shares and have no stake in the combined company afterwards.

For example, an acquirer offering 45 in cash per share for a target with 20,000,000 shares pays 900,000,000 in total. Target shareholders know exactly what they will receive.

The acquirer may fund cash consideration from its existing cash, new borrowing or proceeds from issuing shares to other investors. Cash deals can signal the acquirer's confidence that the target is worth more than the price, since it keeps all future gains and bears all the risks.

For target shareholders, cash provides certainty but usually creates a taxable event, since selling shares for cash may trigger capital gains tax. For the acquirer, cash deals avoid diluting existing shareholders but can increase debt and reduce financial flexibility. Many deals combine cash and stock consideration to balance these factors.