It’s well known that the stock market reacts more favorably if a company is bought with cash than with stock. But the opposite holds true when you buy just a business unit: It’s better to pay with your equity rather than cash. Why? In simple terms, because the choice between cash and equity reveals private […]
by
by
Post
Post
Share
Annotate
- Save
- Get PDF
Buy Copies
Summary. Reprint: F0905C It’s well known that stock markets react more favorably if a company is bought with cash rather than with stock. But the opposite holds true for just a business unit. Here’s why.
Post
Post
Share
Annotate
- Save
- Get PDF
Buy Copies
It’s well known that the stock market reacts more favorably if a company is bought with cash than with stock. But the opposite holds true when you buy just a business unit: It’s better to pay with your equity rather than cash. Why? In simple terms, because the choice between cash and equity reveals private information that the market uses to gauge value.
A version of this article appeared in the May 2009 issue of Harvard Business Review.
New!
HBR Learning
Strategy Planning and Execution Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Strategy Planning and Execution. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
How to develop a winning strategy—and put it to work.
Start Course
Read more on Strategy or related topics Mergers and acquisitions, Accounting and South America
MS Marie E. Sushka (marie.sushka@asu.edu) is a professor at Arizona State University and HEC Paris.
UH Ulrich Hege (hege@hec.fr) is an associate professor at HEC Paris.
Post
Post
Share
Annotate
- Save
- Get PDF
Buy Copies
New!
HBR Learning
Strategy Planning and Execution Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Strategy Planning and Execution. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
How to develop a winning strategy—and put it to work.
Read more on Strategy or related topics Mergers and acquisitions, Accounting and South America
