Mixed-Payment Deals and Target Shareholder Preferences for Method of Payment

Abstract:     
Corporate acquirers have increasingly resorted to a mix of cash and stock to finance takeovers in recent years. We show that mixed payment deals are rich in diversity and fundamentally different from pure cash and pure stock deals. One unique feature of mixed payment deals is that they often offer target shareholders the choice of payment method. Based on election results, we document that target shareholders generally prefer stock over cash, especially when the value of the stock payment is high relative to the cash payment on the election date. We also document that a non-trivial fraction of target shareholders fail to make a valid election even in the presence of a substantial value difference between the stock and cash payments.

Number of Pages in PDF File: 38

Keywords: Mergers, acquisitions, cash, stock

JEL Classification: G34

working papers series