In acquisitions involving a U.S. public company seeking to acquire another U.S. public company, the form of consideration to be paid to the target company’s shareholders can affect the required documentation and deal process. A public company acquiror can offer the target company’s shareholders consideration in the form of cash, stock, or a combination of cash and stock. This article will explore public company M&A deals involving 100% cash consideration.

The acquiror company may finance the payment of the cash consideration to the target company’s shareholders with cash on hand, but it may also raise financing in order to pay a portion of the cash consideration. For example, the acquiror company may raise financing by issuing bonds or entering into a term loan facility, revolving credit facility, or bridge loan facility.

Public company M&A deals are often structured as reverse triangular mergers. A reverse triangular merger involves the creation of a subsidiary of the acquiror, the so-called “merger sub” entity. The merger sub will merge with and into the target company, with the target company surviving.

Public company acquisitions can be structured as one-step voted mergers or two-step tender offers. Most commonly, they are structured as one-step mergers. This means that one entity will acquire substantially all the assets and liabilities of another entity. This article focuses on one-step mergers. A two-step tender offer process can also be used. A two-step tender offer process involves the acquiror company directly making an offer to acquire shares held by the target company’s public shareholders. From there, the acquiror company will effectuate a “squeeze-out” merger to buy the remaining shares not tendered.

Once the acquiror and target sign a merger agreement, the companies will issue a joint press release announcing the merger transaction. A Form 8-K will be publicly filed with the Securities and Exchange Commission (SEC) at the time of signing to provide a summary of the pending merger. The Form 8-K will summarize the key terms of the merger agreement, such as the consideration being paid, required closing conditions, the board’s recommendation with respect to the transaction, and termination fees. The merger agreement will be filed as an exhibit to this Form 8-K.

The target company will then prepare and file a preliminary proxy statement (known as a PREM14A filing) with the SEC. After at least 10 days have passed, the company may be able to file a definitive proxy statement (known as a DEFM14A filing) with SEC. However, if the SEC has comments on the proxy statement disclosure, this may lead to delays. After the definitive proxy statement has been filed, a special shareholder meeting will be held for the target company’s shareholders to vote on the merger proposal.

There have been a number of recent examples of multibillion dollar public company M&A deals involving all cash consideration. In March 2024, Cisco Systems completed the acquisition of Splunk Inc. for $157.00 per share in cash. In December 2023, Pfizer completed the acquisition of Seagen Inc. for $229 per share in cash. Elon Musk’s acquisition of Twitter in October 2022 also involved all cash consideration. In order to finance the acquisition, Mr. Musk entered into $13 billion of financing arrangements, including a senior secured term loan facility and a bridge loan facility. These all cash deals were all structured as reverse triangular, one-step mergers.