When Buyers Pay in Stock: What Paper Consideration Means for Sellers

Three transactions announced within four days last week shared a feature that matters more than their combined size: very little of the price was paid in cash at closing. For business owners, the cluster is a timely reminder that the form of consideration can shape a seller's outcome as much as the headline number.

A Week of Paper Currency

Between August 1 and August 4, acquirers put together a run of deals paid largely in something other than immediate cash. Supernus Pharmaceuticals and Indivior agreed to an all-stock merger of equals, exchanging each Supernus share for 1.5401 Indivior shares to create a combined neuroscience company with roughly $2.2 billion in revenue. The only cash in the structure is a $1 billion special dividend paid to Indivior holders before closing, funded in part by new borrowing.

Two days later, Prologis announced a recommended acquisition of SEGRO, the UK's largest listed industrial landlord, in a deal worth about 14 billion pounds, or $18.8 billion. SEGRO shareholders will receive 0.0920 new Prologis shares for each SEGRO share. A partial cash alternative exists, but it is capped at roughly 3.5 billion pounds, a quarter of the total.

The same day, Curium agreed to acquire radiopharmaceutical maker Lantheus for $102.50 per share in cash plus a contingent value right worth up to another $12.00 per share if Lantheus products hit commercial milestones through 2030. The structure pushes total value up to $8.0 billion, but a meaningful slice of it is conditional and years away.

Deal advisors have been pointing at this pattern all year. Companies with well-priced equity are using their own shares as acquisition currency, and contingent value rights appeared in more than two dozen public deals last year, with practitioners expecting more in 2026.

Why Buyers Are Reaching for Shares

Stock consideration solves three problems for a buyer at once. First, it conserves cash and avoids new debt at a time when leverage remains expensive; lenders are still holding buyout leverage well below the levels of the last cycle. Second, when a buyer believes its own shares are fully valued, paying in stock lets it spend that valuation rather than its balance sheet. Third, stock shifts risk. In an all-cash deal, the buyer alone bears the risk that the combined business underperforms. In a stock deal, the seller's shareholders keep carrying a piece of that risk after closing, because their payment rises and falls with the combined company.

That last point cuts both ways. Sellers who take stock keep upside they would have given away in a cash sale. SEGRO shareholders, for example, will own part of the world's largest logistics real estate platform rather than exiting the sector at a fixed price. But they also accept that the value of their deal will not be known until they actually sell the shares they receive.

Fixed Ratios, Floating Values: The Mechanics That Set Your Price

Most stock deals, including both of last week's share-based transactions, use a fixed exchange ratio: a set number of buyer shares per seller share. The ratio is fixed; the value is not. If the buyer's stock falls 15 percent between signing and closing, the seller's consideration falls 15 percent with it. Deals can take six months or more to close (Prologis and SEGRO do not expect to complete until the first half of 2027), so this exposure is not theoretical.

The alternative is a floating ratio, which fixes the dollar value per share and adjusts the number of shares at closing. That protects the seller's value but exposes both sides to dilution uncertainty. Some deals bound the outcome with a collar, a band within which the ratio adjusts and outside of which one party can walk or renegotiate.

Cash elections add another wrinkle. When a deal offers shareholders a choice between cash and stock, the cash pool is almost always capped, as it is in the SEGRO transaction. If too many holders elect cash, elections get prorated, and a seller who wanted cash ends up holding stock anyway. Owners reading a headline that says a cash alternative is available should check the cap before assuming they can take the money.

Contingent Value Rights: The Public Market's Earnout

The Lantheus CVR is worth studying because it is the public-company cousin of a structure private sellers see constantly: the earnout. A CVR promises additional payment if defined milestones are met after closing. It lets a buyer bridge a valuation gap without paying for the target's projections up front, and it lets a seller's board claim a higher headline number.

The fine print decides what the instrument is actually worth. The Lantheus rights are non-transferable, so holders cannot sell them, and they pay only if specified commercial targets are achieved through 2030. Private-deal earnouts carry the same character: deal-terms studies consistently show that contingent consideration pays out well below its stated maximum, and disputes over how milestones are measured are one of the most common sources of post-closing litigation.

The practical reading for any seller: value the certain portion of an offer first, and treat the contingent portion as an option whose value depends on definitions, measurement rights, and the buyer's post-closing incentives to hit or miss the target.

What Private Sellers Should Take From This

Owners of private companies rarely receive listed stock with a fixed exchange ratio, but they face the same choice in different clothing. A strategic acquirer may offer its shares, public or private, as part of the price. A private equity buyer will usually ask the owner to roll 10 to 40 percent of proceeds into equity of the new holding company. Sellers regularly accept seller notes and earnouts that defer value into future periods.

Every one of those instruments is paper, and the questions from last week's deals apply directly. What is the paper worth today, and who set that value? A rollover priced off the same multiple the buyer is paying you is very different from one priced off a higher internal mark. When can you convert it to cash, and what has to happen first? Public stock may carry lockups or registration requirements; rollover equity in a private holding company may have no liquidity until the sponsor exits, which now routinely takes six years or longer. What protects you in between? Minority holders should understand their information rights, tag-along rights, and whether anyone can force them to sell or dilute them.

There is also a tax dimension worth planning early. Stock-for-stock transactions that qualify as reorganizations can defer capital gains tax until the received shares are sold, and properly structured rollovers can do the same for the rolled portion. Cash is taxed at closing. The after-tax comparison between a smaller cash offer and a larger mixed offer is rarely obvious, and it depends on structure decisions made well before a letter of intent.