A cash-and-stock merger is an acquisition in which the shareholders of the target company are paid partly in cash and partly in shares of the acquirer. The terms state a cash amount and an exchange ratio for each target share, for example 20 in cash plus 0.5 of an acquirer share. It sits between an all-cash deal and a stock-for-stock merger in mergers and acquisitions.
Some deals fix the mix for everyone. Others let each holder choose between cash, shares or a combination, subject to overall limits; if one option is oversubscribed, elections are scaled back pro rata. In that case the event is a mandatory with options corporate action, with a default for holders who do not respond. Processing is described under merger consideration processing. A fractional entitlement to acquirer shares is normally settled by a cash-in-lieu payment.