Stock or Cash?: The Trade-Offs for Buyers and Sellers in Mergers and Acquisitions

Companies are increasingly paying for acquisitions with stock rather than cash. But both they and the companies they acquire need to understand just how big a difference that decision can make to the value shareholders will get from a deal.

by

Alfred Rappaport

and

Mark L. Sirower

by

Alfred Rappaport

and

Mark L. Sirower

From the Magazine (November–December 1999)

The legendary merger mania of the 1980s pales beside the M&A activity of this decade. In 1998 alone, 12,356 deals involving U.S. targets were announced for a total value of $1.63 trillion. Compare that with the 4,066 deals worth $378.9 billion announced in 1988, at the height of the 1980s merger movement. But the numbers should be no surprise. After all, acquisitions remain the quickest route companies have to new markets and to new capabilities. As markets globalize, and the pace at which technologies change continues to accelerate, more and more companies are finding mergers and acquisitions to be a compelling strategy for growth.

A version of this article appeared in the November–December 1999 issue of Harvard Business Review.

AR

Alfred Rappaport is the Leonard Spacek Professor Emeritus at Northwestern University’s J.L. Kellogg Graduate School of Management and author of Saving Capitalism from Short-Termism: How to Build Long-Term Value and Take Back Our Financial Future.
MS

Mark Sirower is a leading authority on M&A and has advised on hundreds of global transactions. He is a leader in Deloitte’s M&A and Restructuring practice, and previously was global M&A leader at Boston Consulting Group. He is the co-author of The Synergy Solution: How Companies Win the Mergers and Acquisitions Game.

Stock or Cash?: The Trade-Offs for Buyers and Sellers in Mergers and Acquisitions

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