For an acquisition to be tax-free the acquirer must offer cash to the equity holders of the acquired
ﬁrm.

Question

Quizplus · Accepted Answer

This statement is false. An acquisition can be tax-free even if the acquirer does not offer cash to the equity holders of the acquired firm. It can be structured as a stock-for-stock exchange, where the shareholders of the acquired firm receive stock in the acquiring company instead of cash. This type of exchange may qualify for tax-free treatment under certain conditions.

For an Acquisition to Be Tax-Free the Acquirer Must Offer