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The End Of Equity: All Cash M&A Deals More Than Doubled In A Decade

Over the last ten years, the percentage of M&A deals done with all cash has more than doubled, from 13.9% in 2000 to 29% in 2010.

Negotiating Pay
CNBC.com
Negotiating Pay

And those numbers are not being distorted by a rising share of cash deals in a declining M&A deal market either: Over the same period, the total number of M&A transactions done all cash also more than doubled — rising from 1,393 in 2000 to 2,799 in 2010. (For those of you scoring at home, that would bring the total number of M&A deals in 2000 to just over 8000, and the total number of M&A deals in 2010 to about 9650.)

There has been some decline from the peak number of all cash deals done in 2007, a total of 3,385, to the current level of 2,799 in 2010 — but the broader long-term trend remains intact. (To a lesser extent, a decline in the percentage of all cash deals can also be observed — from a high of 31.1% in 2008 to the current level of 29% in 2010 — but a less than 7% peak-to-trough delta doesn't seem terribly significant, bearing in mind the broader economic backdrop during that two year period.)

In any case, the big question remains: Why are targets getting all cash deals with twice the frequency they did ten years ago? There doesn't seem to be any way to justify the increase with a correlation to, say, prevailing interest rates.

All told, it sounds like a sweet deal for the guys getting bought.

(Hey: If you love the stock of your acquirer so much, you're more than welcome to buy it with your newfound cash windfall in the open market.)

Conversely, it sounds like a loss of leverage for those doing the acquiring. (The ability to impose restrictive conditions, for example through the vesting of stock options, would serve to strengthen the hand of the acquirer with regard to executive retention, among other factors.)

Speculation about underlying causes and effects may vary, but it's an interesting trend — and the raw data don't lie.

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Year
Percent of deals done w/ 100% Cash
Total number of deals done w/ 100% cash
Change in total number of deals done with 100% Cash (YOY)
Change in percent of deals done w/ 100% cash (YOY)
2000 13.9%
2001 17.3% 1,393 24.46%
2002 22.9% 1,495 7.32% 32.37%
2003 21.5% 1,507 0.80% -6.11%
2004 22.8% 1,900 26.08% 6.05%
2005 27.7% 2,570 35.26% 21.49%
2006 28.7% 3,105 20.82% 3.61%
2007 28.9% 3,385 9.02% 0.70%
2008 31.1% 3,194 -5.64% 7.61%
2009 30.2% 2,890 -9.52% -2.89%
2010 29.0% 2,799 -3.15% -3.97%

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