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All-cash deal

An acquisition where target shareholders receive a fixed cash amount per share, giving a certain payout but a taxable event on closing.

Cash deals are the simplest to price. The target's shares converge toward the offer price as closing approaches, and the remaining spread reflects the chance of failure plus the time value of money. There is no exposure to the acquirer's stock.

The downside for the holder is tax: receiving cash realises the gain immediately, unlike most all-stock-deal structures, which can roll the basis forward.

Example: a $62 cash offer on a stock bought at $30. Closing crystallises a $32 per-share gain. At a 20% long-term rate that is $6.40 a share of tax due in the year of closing.

Related: all-stock-deal, merger, merger-arbitrage

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