Cash Merger
An acquisition in which shareholders of the target company receive a fixed cash payment per share as consideration.
What is Cash Merger?
A cash merger is an acquisition structure in which shareholders of the target company receive a predetermined fixed amount of cash per share as merger consideration, after which the target ceases to exist as a publicly traded company and is absorbed into the acquirer. Cash mergers provide target shareholders with certainty of value and immediate liquidity, eliminating exposure to post-merger integration risk. They are typically funded through the acquirer's cash reserves, new debt issuance, or a combination of both. Unlike stock-for-stock mergers, cash mergers are taxable events for target shareholders, who must recognize any gain or loss on their shares in the year of the transaction.
Example
In January 2022, Microsoft Corporation announced its intention to acquire Activision Blizzard, Inc. in an all-cash merger at $95.00 per share, representing a 45% premium to Activision's closing price prior to announcement. The transaction, valued at approximately $68.7 billion, was the largest acquisition in gaming industry history. Following an extended regulatory review process, the deal closed in October 2023 after receiving approvals from regulators in the US, EU, and UK.