Does seller prefer cash or stock usually?
Hey guys,
Does seller prefer cash or stock more often? What do you think is preferred by sellers usually?
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Economically, they should be indifferent (if acquiror consideration properly priced, forgot the term / theory name), but receipt of cash is a taxable event for shareholders, which may play into the decision.
Might be off base here, but I think there have been a study or two that show all-cash deals usually result in a higher premium — perhaps because the seller knows the buyer is flush, and can press them more if they really want the asset.
I’d say that most buyers prefer to get paid in cash, but might accept stocks if the buyer is requiring them to have some skin in the game for a while. I don’t see any reasons why a seller would prefer stocks as opposed to cash, all else equal.
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