Cash vs Stock Deals: What % of Tech M&As Are Equity-Based?

Mergers and acquisitions in the tech world come in all shapes and sizes. Some are driven by pure cash. Others are powered by stock. And many fall somewhere in between. If you’re running a tech company — or looking to buy or sell one — understanding how equity fits into M&A deals can give you a serious edge.

1. In 2023, approximately 64% of tech M&A deals involved some form of stock consideration

Why equity deals dominated in 2023

2023 was the year equity ruled the deal table. Nearly two-thirds of tech M&A deals included some kind of stock element. That’s not a fluke. It’s a sign of how tech buyers and sellers think in today’s market.

When acquirers have strong stock prices, they prefer to use that stock as a form of currency. It lets them conserve cash, especially useful when interest rates are high and borrowing gets expensive. On the flip side, sellers may welcome stock as a way to ride the wave of a larger, more stable company’s growth.

It’s a mutual bet on the future.

What this means if you’re buying

If you’re an acquirer with a high share price, stock gives you flexibility. You can lock in deals without draining your cash reserves. But keep in mind — using stock dilutes your existing shareholders. You have to weigh short-term gain against long-term equity impacts.

Here’s how to make it work:

Ensure your stock valuation justifies its use as currency.
Model how much dilution the deal creates — and what it means for EPS.
Align deal structure with your post-acquisition strategy. Will you retain talent? Integrate fully? Spin-off?

What this means if you’re selling

As a founder or seller, stock can be attractive — but only if you believe in the acquirer’s future. If their share price drops after the deal, you might end up with far less than expected.

Here’s what to check before accepting stock:

Study the acquirer’s historical stock performance and volatility.
Review lock-up periods and restrictions.
Ask for board representation or influence in post-merger decisions.

Stock can be a bet on growth. Just be sure you’re betting wisely.

2. Only 29% of tech M&A transactions in 2022 were all-cash deals, down from 42% in 2020

Cash is no longer king

A few years ago, most tech deals were sealed with cash. But 2022 flipped the script. All-cash deals fell sharply, dropping below one-third of all transactions. That’s a big shift — and it’s telling.

Rising interest rates made capital more expensive. Meanwhile, acquirers started holding onto their reserves to stay agile. That made stock-based and hybrid deals more attractive.

Why cash deals declined

The macroeconomic environment played a major role. Here’s what was happening behind the scenes:

Interest rate hikes reduced cheap financing options.
Stock-heavy buyers used their market cap as leverage.
Buyers became more cautious about large up-front commitments.

But there’s also a strategic reason: equity deals allow buyers and sellers to align incentives. Sellers stay invested. Buyers gain flexibility.

Should you insist on cash?

It depends on your goals.

If you’re selling and want to walk away cleanly, cash is ideal. It’s clear, fast, and final. But fewer buyers are offering all-cash deals today — especially for large or growth-stage companies.

If you’re a buyer, cash might be better in uncertain stock environments. It gives the seller confidence and removes future valuation questions. But it can strain your balance sheet and reduce optionality.

To find the right balance:

Mix cash and stock if trust is high but certainty is needed.
Use earnouts or performance milestones to bridge valuation gaps.
Always compare after-tax outcomes for both sides.

3. Hybrid deals (cash + stock) made up 41% of tech acquisitions in 2023

The rise of blended structures

Hybrid deals are the new normal. In 2023, nearly half of tech M&As combined both cash and stock. That’s a powerful signal — flexibility matters.

This approach appeals to both sides. Sellers get some immediate liquidity and still hold onto upside. Buyers reduce upfront cash burn while sharing future risk.

It’s a smart middle ground.

What makes hybrid deals so popular

A few key reasons stand out:

Valuation gaps are easier to bridge. Cash satisfies immediate value; stock promises future growth.
Acquirers reduce dilution while still preserving cash.
Sellers can diversify their risk by getting both upfront value and potential long-term gains.

This structure is especially useful in growth tech sectors, where valuation disagreements are common.

Structuring hybrid deals that work

For acquirers:

Decide what percentage of the deal will be cash vs. equity based on your stock performance, cash reserves, and tax planning.
Use stock for long-term talent retention incentives.
Model dilution scenarios thoroughly before finalizing terms.

For sellers:

Ask for protective clauses — like anti-dilution terms or minimum valuation guarantees.
Negotiate for strategic influence post-merger if taking significant stock.
Plan your exit strategy for stock holdings based on lock-up timelines and vesting periods.

Hybrid deals give you options. But they also require careful planning on both ends.

4. Equity-based deals accounted for 58% of tech M&A activity during the 2021 SPAC boom

SPACs changed the game

2021 was a strange and fast-moving year. Special Purpose Acquisition Companies (SPACs) took the tech world by storm. With easy access to capital and high valuations, SPACs closed deals at a record pace.

And nearly 6 out of 10 of those tech M&As were equity-based.

That wasn’t just a trend — it was a clear sign that equity was becoming the dealmaker’s tool of choice.

Why SPACs leaned heavily on stock

Most SPACs had limited cash on hand. Their value came from public listings and projected growth. So, they offered stock as the primary deal currency.

This helped them:

Close faster with fewer financing hurdles.
Offer sellers a chance to benefit from future growth.
Stay liquid for additional acquisitions or operational needs.

It was appealing — especially to startups and early-stage tech companies with ambitious roadmaps.

How to learn from the SPAC equity wave

If you’re dealing with a SPAC or any equity-heavy buyer:

Be cautious of hype. Equity offers during boom periods can feel generous but collapse quickly if market sentiment changes.
Demand clarity. Understand how much of the combined company you’ll own — and how future dilution might impact that.
Protect yourself. Use earnouts or staggered equity vesting tied to real performance.

Equity-based SPAC deals aren’t inherently risky. But they do demand more diligence. Know what you’re getting into — and what could change after the closing bell.

5. In large-cap tech M&As (over $5B), 72% were stock-heavy deals in 2022

Big deals favor big stock plays

In 2022, nearly three-quarters of tech deals over $5 billion were done primarily using stock. That makes sense when you think about it. At this scale, all-cash offers can create enormous pressure on a buyer’s balance sheet.

Stock, on the other hand, becomes a powerful tool. It allows large acquirers to preserve capital, absorb companies efficiently, and keep stakeholders aligned for the long haul.

Why stock dominates in high-value transactions

Here’s what drives this behavior at the top end of the market:

Most large-cap acquirers have high market caps and stable stock prices.
They face board and shareholder scrutiny on massive cash outflows.
Stock deals send a strong signal that the acquirer believes in the combined future.

For sellers, stock can mean greater upside. If they trust the buyer’s long-term vision, it’s a win.

But here’s the rub — the stakes are higher. One misstep in integration or market confidence, and the value of that equity can tumble.

Your approach if you’re operating at this scale

For acquirers:

Be transparent with investors about deal rationale and expected dilution.
Use equity strategically to retain acquired leadership and teams.
Avoid overpaying simply because you can issue stock freely.

For sellers:

Bring in experienced financial advisors to structure your equity properly.
Push for performance-linked bonuses to protect against short-term volatility.
If stock is a big chunk of the deal, demand real access to influence post-acquisition.

Stock-heavy deals at the $5B+ level can be transformative. But only if both sides play smart.

6. Among public-to-private tech acquisitions, 35% involved stock as primary currency

Not all public buyouts are cash-only

You might think that when a private buyer takes a public company off the market, it’s all about cash. But in 2022 and 2023, over a third of those deals used stock as the main form of payment.

That’s a big deal.

It means even in transactions where private equity or strategic buyers take firms private, equity still plays a major role — and not just cash.

Why equity shows up in public-to-private plays

A few reasons this happens:

Private buyers often use stock in roll-up strategies or portfolio consolidation.
Sometimes, the deal is structured as a merger into a new entity, not just a buyout.
Sellers may prefer stock in a stronger parent company versus immediate cash.

It’s also about keeping talent. A stock-based offer in a new private entity can be more appealing than cash with a non-compete.

Structuring these deals smartly

If you’re selling your public tech firm to a private buyer:

Know the value of what you’re getting. Private company stock isn’t as liquid — so discount it accordingly.
Ask about rights, exit timelines, and future liquidity events.
Consider whether the acquiring entity has real growth potential — or if you’re taking on more risk.

If you’re buying a public company and using stock:

Be very clear about your cap table post-acquisition.
Offer sellers real transparency about their stake in your operations.
Watch for pushback from public shareholders, especially if dilution is heavy.

These deals are complex — but not impossible. Just be deliberate in how equity is used.

7. Private-to-private tech deals had over 80% stock usage in 2023, primarily to preserve cash

When cash is tight, stock takes over

In 2023, private tech companies acquiring other private firms used stock in over 80% of deals. That’s huge.

Why? Simple: cash is harder to come by in the private world. And valuations can be tricky. Stock becomes the common language.

This trend shows how the private tech ecosystem is evolving. Equity is now the go-to way to grow, merge, and align — especially in lean times.

The appeal of equity in private-to-private deals

Here’s what makes stock so attractive in these situations:

Cash burn is already high — acquirers don’t want to drain reserves further.
Equity keeps both sides invested in the combined future.
Many private firms are valued based on growth potential, not current revenue — stock reflects that better than cash.

In a down market or tight fundraising environment, stock becomes a survival tool.

How to use equity effectively in private deals

If you’re buying another private company:

Be clear about how your stock is valued. Use third-party advisors if needed.
Offer terms that motivate the target’s team — not just the founders.
Be transparent about vesting schedules, rights, and exit timelines.

If you’re selling:

Understand your future role. Will you be expected to stay? Build? Lead?
Ask for board participation or observer rights if your stake is significant.
Make sure your equity has protective provisions — especially if it’s in a new combined entity.

Private-to-private deals are where innovation meets caution. Stock allows growth without compromise — but only when structured right.

8. In the software sector, 61% of M&A deals used equity or hybrid structures in 2022

Software eats stock-based M&A

The software world moves fast. Companies grow quickly, valuations swing wildly, and strategic fit matters just as much as revenue. That’s why in 2022, over 60% of software-related mergers and acquisitions used stock or hybrid structures.

Equity is simply more flexible — and better suited for deals in high-growth, high-multiple sectors like SaaS, DevOps, or cybersecurity.

Why stock makes sense in software deals

Software firms rarely have piles of free cash. Instead, they’re valued on ARR (annual recurring revenue), customer retention, and growth velocity. So rather than burn cash or raise debt, they turn to stock.

Here’s what makes equity especially appealing in this niche:

Fast-growing companies can leverage future potential to close deals now.
Sellers are often founders or investors who understand how equity works.
Stock helps keep product, engineering, and sales teams motivated post-acquisition.

Plus, buyers avoid overextending themselves when scaling through multiple roll-ups.

What software founders should do when equity is on the table

If you’re being acquired:

Ask for clarity on the acquirer’s cap table and how your shares will convert.
Ensure your team has visibility into stock options, vesting, and exit windows.
Understand how much real influence you’ll have in the merged company.

If you’re acquiring:

Use stock to retain mission-critical talent.
Offer performance-linked vesting to drive post-deal results.
Communicate openly — founders don’t want to feel like they’re being absorbed without a say.

Software deals are fast-paced. Equity gives both sides the breathing room and flexibility to make it work — as long as it’s handled with care.

9. Cross-border tech M&As were 48% equity-based in 2021, rising to 54% in 2023

Going global with stock in hand

Cross-border tech M&As are a different beast. Currency differences, tax issues, and regulatory hurdles can make cash transactions messy. That’s one reason equity is becoming more popular — over half of these deals used stock in 2023.

That’s a meaningful jump from 48% just two years earlier.

It signals something important: equity is becoming the global standard for tech acquisitions.

Why equity helps smooth cross-border deals

Cash deals in cross-border settings face challenges:

Currency conversion adds volatility.
Repatriation of funds can create tax headaches.
Governments may scrutinize large capital transfers.

Stock avoids most of those. It’s easy to price, easy to transfer, and often easier to justify to regulators. Plus, it gives international sellers a stake in the buyer’s long-term success — which can soften negotiation edges.

Tactics for cross-border equity deals

If you’re a buyer:

Use equity to bridge regulatory or geopolitical tensions.
Offer localization perks — like partial listing in the seller’s region or dual-language shareholder documents.
Align local leadership through equity incentives and governance roles.

If you’re a seller:

Understand the acquirer’s financial reporting and market reputation.
Confirm that you’re receiving stock that’s tradable or has clear liquidity milestones.
Ask about legal protections in your jurisdiction if disputes arise.

Equity helps global deals happen faster, smoother, and with fewer surprises. Just don’t skip legal and tax review — the fine print matters more when borders are involved.

10. Cash-only deals dropped by 18% year-over-year in 2023 within tech transactions

The cash crash is real

In 2023, there was a steep 18% drop in cash-only tech M&As compared to the previous year. That’s not a small slide — it’s a major shift in how deals get done.

Cash used to be the gold standard. Today, buyers are keeping it close. And sellers are increasingly open to taking shares, especially when growth is uncertain and raising capital is tougher.

What’s behind the fall of cash-only deals

There are a few major forces at play:

Higher interest rates make borrowing for cash deals more expensive.
Market volatility makes stock-based pricing more acceptable.
Buyers are becoming more disciplined with liquidity and capital reserves.

This drop is also a sign that the power balance has shifted. Sellers are more willing to compromise on structure to get deals done — especially in competitive or down-market environments.

How to navigate today’s cash-light environment

For buyers:

Be honest about your cash capabilities early in negotiations.
Don’t assume a cash offer will win — in many cases, equity or hybrid structures can be more attractive if your stock is performing well.
Use creative hybrids to bridge pricing gaps (e.g., stock upfront, cash earnout).

For sellers:

If you want cash, be prepared to accept a discount.
Compare after-tax outcomes of cash vs. equity — they can differ greatly depending on your jurisdiction.
Ask for a higher cash mix if your exit timeline is short or if you don’t believe in the acquirer’s long-term growth.

The bottom line: cash deals aren’t dead. But they’re no longer the default. Flexibility wins.

11. Among deals involving venture-backed startups, 67% were equity-based

Startups prefer stock — and so do their buyers

Venture-backed startups rarely close deals in cash. In fact, over two-thirds of these M&As used equity in 2023. That’s not surprising. These companies are built on growth, vision, and future potential — not on big cash flows.

For acquirers, offering stock keeps the founder’s skin in the game. For founders, it’s often the only practical way to exit without walking away from everything they’ve built.

Why stock dominates venture-backed exits

There are several reasons equity deals are so prevalent in this space:

Startups are often valued based on future metrics — stock aligns better with those.
Founders are used to equity. It’s how they raised capital. It’s how they pay their team.
Buyers (especially strategic ones) want continuity — and stock is a great retention tool.

Also, many of these deals aren’t just about the tech or product. They’re about the team. Equity helps make sure those teams stay post-acquisition.

Structuring startup equity deals right

If you’re acquiring a startup:

Don’t just focus on headline valuation. Think about retention. Equity makes that easier.
Avoid overcomplicating your offer. Keep cap tables clean and vesting clear.
Offer founders influence — not just shares.

If you’re a startup founder selling:

Push for smart earnouts or performance bonuses tied to real milestones.
Clarify how your stock converts and what rights it comes with.
Think about your team — if you’re staying, make sure they’re rewarded too.

For both sides, stock deals let you bet on a shared future. But both parties need to believe in what’s being built together.

12. Nasdaq-listed acquirers used stock in 73% of their tech M&A transactions in 2022

Public buyers are leaning hard on equity

When a buyer is already publicly listed — especially on a platform like Nasdaq — it changes how deals are done. In 2022, Nasdaq-listed acquirers used stock in nearly three out of every four tech acquisitions they made.

That’s not just a convenience. It’s a smart, strategic play.

Why Nasdaq companies rely on stock

Public companies have one major advantage: a liquid, tradeable currency in the form of their shares. If their stock is performing well, they can use it to fund acquisitions without raising debt or dipping into cash.

Other reasons stock becomes the go-to choice:

Issuing shares is faster and often cheaper than raising capital.
Shareholders prefer deals that don’t deplete cash reserves.
Stock-based deals allow sellers to stay connected to the acquiring company’s future.

It’s a win-win — as long as both parties see value beyond just the transaction.

What sellers should know when taking public stock

If you’re selling to a Nasdaq-listed buyer:

Research their share performance over the last 12 to 24 months. Are they stable, volatile, or declining?
Ask about lock-up periods. You might not be able to sell shares right away.
Understand how the deal will affect your voting rights, board involvement, or future influence.

If you’re the buyer:

Communicate clearly with your investors. Stock-heavy deals can raise dilution concerns.
Time your deal when your stock is strong. The better the price, the cheaper the acquisition.
Use stock as a tool to retain leadership from the acquired company.

Public stock is powerful, but it’s not magic. You need confidence, timing, and alignment to make it work.

13. Hardware M&As in tech leaned more towards cash, with 55% cash-only structures

When things are physical, buyers pay cash

Not all tech deals are built on code. In the hardware space — chips, devices, and infrastructure — more than half of M&As in recent years have been all-cash. That’s a very different pattern from software or SaaS acquisitions.

Why the shift? Hardware is more predictable. It’s capital-heavy, asset-driven, and less speculative. That makes buyers more comfortable with writing checks instead of issuing stock.

Why cash is more common in hardware

Here’s what drives the preference for cash in hardware M&As:

Tangible assets make valuation easier and clearer.
Cash ensures immediate ownership and fewer long-term entanglements.
Founders and investors often want quick liquidity, especially in older hardware firms.

It’s also harder to retain entire teams in hardware deals. So the incentive of stock-based retention isn’t as powerful.

How to approach hardware M&A with cash on the table

For buyers:

Model your post-deal capital needs carefully. Hardware firms usually come with CapEx obligations.
Consider partial stock to preserve flexibility — especially for long-term talent or R&D teams.
Avoid overpaying just because you’re offering cash. Stay disciplined.

For sellers:

Compare cash offers carefully — some may include milestone payments or deferred components.
Push for upfront clarity on taxes, closing timelines, and working capital adjustments.
Know your worth — even in a cash deal, negotiation power comes from what you’ve built.

Cash works well when the business is stable and the exit is clean. Just don’t let the simplicity blind you to the details.

14. 84% of equity-based M&As in tech occurred during periods of rising acquirer share price

Timing is everything

When acquirers feel strong, they move fast. In fact, over 8 out of 10 equity-based tech M&A deals happened while the buyer’s share price was going up.

Why? Because stock becomes more powerful when it’s rising. It’s a more valuable currency — and buyers want to use it while it’s hot.

Why share price momentum drives equity deals

There are clear advantages for buyers whose stock is climbing:

They can offer fewer shares to achieve the same deal value.
Their shareholders are more likely to support acquisitions.
Sellers are more open to accepting equity when the buyer’s trajectory is positive.

It’s all about perceived upside. If the acquiring company is doing well, sellers feel more confident riding along.

How to time and manage equity-driven deals

For acquirers:

Act during windows of strength. Use investor confidence to your advantage.
Communicate early — explain why the deal makes sense now, not later.
Be careful not to overuse stock just because it’s rising. The market can turn.

For sellers:

Look closely at the stock’s upward trend. Is it based on fundamentals or short-term hype?
Negotiate for performance triggers. If the acquirer’s stock drops after the deal, your upside could vanish.
Don’t be rushed. A rising stock makes the deal look attractive, but you still need to do your diligence.

Momentum is powerful — but you have to catch it at the right time and lock in the right protections.

15. Stock-based deals represented 61% of tech acquisitions during Q2 2022 alone

One quarter tells a bigger story

In just three months — Q2 of 2022 — 61% of all tech M&A deals used stock. That single quarter captured a broader trend: equity isn’t just a fallback anymore. It’s a preferred choice, especially in uncertain markets.

This also marked a shift in how companies view growth. Instead of hoarding cash or raising debt, they’re choosing to share their future in exchange for innovation, access, or market expansion.

Why that quarter mattered

Q2 2022 wasn’t just any quarter. It was:

A period of rising inflation and tightening capital.
A time when tech valuations had started to cool off.
A moment when both buyers and sellers were recalibrating expectations.

Equity deals rose because they allowed movement without massive cash shifts. And because trust in future value — not just present earnings — was still relatively strong.

How to think strategically during short-term equity waves

If you’re buying:

Use short-term market confidence to make longer-term plays.
Be smart with your equity allocation — don’t use it just because it’s trendy.
Target companies that align with your product roadmap, not just valuation discounts.

If you’re selling:

Don’t assume every equity offer is equal. Look beyond price to structure, rights, and restrictions.
Try to negotiate timing flexibility — so you can wait out lock-up periods and sell at the right moment.
Monitor the broader market. If other companies are using stock aggressively, you may have more room to negotiate.

Short bursts of equity dealmaking reveal where confidence lies. Ride the wave, but never lose your footing.

16. During recessionary periods, equity deals comprised up to 70% of all tech M&As

When cash tightens, equity rises

In tough economic times, cash becomes precious. That’s why, during recessionary cycles, equity-based M&A deals in tech often rise to around 70%. It’s not because stock is suddenly better — it’s because it’s available.

Buyers don’t want to deplete reserves. Sellers, faced with limited options, accept stock to keep deals alive. Equity becomes the bridge when capital markets freeze.

Why equity thrives in downturns

Recessions bring uncertainty. But they also create opportunity — especially for well-positioned tech companies looking to expand while others contract.

Here’s why equity is the fallback:

Financing becomes harder to secure, especially for large or speculative cash deals.
Stock lets buyers conserve capital while still growing.
Sellers may have fewer options and are more open to creative structures.

It’s a matter of survival for some and strategy for others.

How to use equity wisely in downturns

If you’re a buyer:

Strike while others are pulling back. Use stock to make acquisitions that will pay off once the market rebounds.
Offer equity in tranches — part upfront, part upon hitting milestones.
Be transparent about your performance and give sellers confidence in the long-term value of your shares.

If you’re selling:

Don’t panic sell. Just because it’s a downturn doesn’t mean you should accept poor terms.
Push for hybrid deals if some cash is still available — even 20–30% liquidity can make a difference.
Understand your buyer’s fundamentals. Are they solid or just weathering the storm?

Equity in a downturn is a lifeline — but only when it’s anchored in strategy, not desperation.

17. Tech M&As above $10B were 90% stock-based between 2020 and 2023

Big deals demand equity

When you cross the $10 billion mark in M&A, everything changes. These aren’t simple transactions — they’re game-changers. And between 2020 and 2023, nearly 90% of tech deals above that size used stock.

That’s no coincidence. Moving that much value around is hard with cash alone. Stock becomes the only practical way to make it happen.

Why mega-deals rely on stock

Let’s break it down:

Cashing out $10B+ often requires debt — and lots of it. That can create long-term financial strain.
Stock lets acquirers structure deals in stages, align interests, and preserve flexibility.
Shareholders expect the buyer to maintain a healthy balance sheet — which stock supports better than massive cash outflows.

For sellers, equity offers something cash can’t: a seat at the table of something even bigger.

Tactics for managing equity in mega-deals

If you’re a buyer:

Be very clear on how the deal impacts your cap table. Investors will watch this closely.
Issue guidance on how the acquisition will grow revenue and value for all stakeholders.
Use restricted stock and performance shares to lock in key leadership from the acquired firm.

If you’re a seller:

Don’t be dazzled by the size of the deal. Focus on how much control and upside you retain.
Negotiate terms that allow for protection against post-deal volatility.
Make sure governance, integration roles, and cultural alignment are part of the agreement.

Stock may be the only way to close a $10B deal — but closing the deal is just the start.

18. Acquirers with price-to-earnings ratios above 30 used stock in 78% of their deals

Valuation drives acquisition style

When a company has a high price-to-earnings (P/E) ratio, it means the market has a lot of confidence in its future. That makes its stock more valuable — and more attractive as deal currency.

That’s why companies with P/E ratios above 30 used stock in almost 80% of their acquisitions. It’s not just smart finance — it’s good business.

Why high-P/E firms prefer equity

Here’s how it works:

A high P/E means the stock is trading at a premium. Buyers can offer fewer shares for the same deal value.
It allows the company to grow through M&A without major cash drawdowns or risky debt.
It signals to the market that they’re leveraging investor confidence into long-term expansion.

In simple terms: if your shares are expensive, it makes sense to use them.

Strategic moves for high-P/E acquirers

If you’re in this position:

Time your acquisitions carefully — don’t overpay just because your stock is doing well.
Be honest with your board and shareholders about how dilution will impact future growth.
Combine stock offers with performance targets to reduce long-term integration risk.

For sellers:

Study the buyer’s financials. Is the high P/E based on strong performance or hype?
Push for valuation-based triggers — if the acquirer’s stock falls, your upside shouldn’t disappear.
Don’t forget liquidity. High stock prices are great — if you can actually sell later.

Equity from a high-P/E buyer can look golden. But it’s only worth something if the business behind it holds up.

19. Acqui-hires in tech were structured as equity deals in over 82% of cases

People-first deals run on stock

When tech companies buy other firms just to get the talent — not the product or customer base — it’s called an acqui-hire. And in over 80% of those cases, the deals are structured primarily with equity.

Why? Because stock keeps people around. And in acqui-hires, people are the whole point.

Why stock is the natural choice for acqui-hires

Here’s what makes equity ideal in these scenarios:

Cash exits might encourage founders or engineers to walk away.
Stock creates alignment. It says, “We want you on board long-term.”
It simplifies compensation, especially when folded into existing employee stock plans.

These deals often look small on paper but have huge impact when the acquired team builds core tech or joins leadership.

Smart ways to structure acqui-hire equity

If you’re the buyer:

Keep the equity clean and clearly tied to performance or retention milestones.
Communicate the bigger mission. Show the team where they fit in and how they’ll grow.
Set clear expectations — not everyone wants to stay for the long haul.

If you’re the seller:

Understand how your shares vest and when you can exit.
Negotiate titles, responsibilities, and compensation in addition to equity.
Make sure your team is part of the conversation — retention only works if they feel involved.

Acqui-hires aren’t about products or patents — they’re about people. Equity keeps the best people invested, motivated, and aligned.

20. In AI and machine learning acquisitions, 66% were predominantly equity-financed

Smart tech, smarter deals

Artificial intelligence and machine learning startups are hot property. But they’re often pre-revenue or early-stage. That’s why, in 66% of AI-focused tech acquisitions, buyers used equity instead of cash.

It’s not just about saving money. It’s about betting on long-term value — and using stock to attract brilliant teams that don’t want to cash out and walk away.

Why equity is perfect for AI M&A

AI startups are often built on breakthrough research, IP, and talent. These companies:

Grow fast but don’t always generate profit yet.
Have high valuations based on future potential.
Attract founders who value upside over short-term liquidity.

So, buyers use stock to close deals and keep the visionaries on board.

This structure also helps buyers hedge their bets. If the AI bet pays off, the equity pays off. If it doesn’t, they haven’t burned through cash.

Structuring equity right in AI acquisitions

For acquirers:

Tie stock to innovation milestones. That keeps the AI team focused on delivery, not just integration.
Keep the terms simple. AI engineers don’t want complicated equity schemes.
Offer transparency and autonomy. That’s often what attracts top AI founders in the first place.

For sellers:

Make sure you have input post-acquisition. Equity only has value if your ideas still have a platform.
Ask for a say in product direction or IP integration.
Understand how equity compares to what you might have raised through VC in 12–18 months.

Stock in AI deals isn’t just money — it’s belief in a shared future. That needs to be built on respect, clarity, and growth.

21. Stock dilution concerns limited equity usage to 52% in small-cap tech deals in 2022

When equity meets hesitation

Not every tech company wants to hand out shares like candy. In small-cap M&As — where the buyer’s total market value is lower — only 52% of deals used equity in 2022. That’s well below the trend in other sectors.

The reason? Dilution.

Smaller companies can’t afford to issue too many shares. Every percentage point matters. So, they use cash when they can, or mix in smaller equity components.

Why dilution scares small buyers

For small-cap acquirers, stock is precious. Issuing too much:

Reduces the ownership of founders and early investors.
Can upset public shareholders who track every move.
Might signal to the market that the company is stretching itself thin.

So even when stock is appealing, they hesitate.

How to use equity without hurting your cap table

If you’re a small-cap buyer:

Limit equity to top-priority deals where the long-term value clearly justifies the dilution.
Consider hybrid structures: 60% cash, 40% stock or earnouts.
Communicate your equity rationale early to investors and your board.

If you’re selling to a small-cap buyer:

Be open to creative structures — stock now, cash later, or even profit-sharing if liquidity is tight.
Ask to see how the deal changes the buyer’s cap table. Know your share of the pie.
Request protections in case future dilution pushes down your stake.

In small-cap deals, stock is a lever — not a crutch. It needs to be pulled with care.

22. Late-stage private tech buyers used equity in 58% of their strategic acquisitions

Mature private firms play the equity card

Late-stage private companies — often just a step away from going public — are becoming big buyers in the tech space. And in 58% of their acquisitions, they’re using equity.

That’s a smart move. They usually have strong valuations, well-known brands, and tight control over how they structure deals. Equity helps them compete with public buyers and save cash for growth.

Why private equity works here

These companies often:

Have high paper valuations, especially during fundraising peaks.
Don’t want to dip into runway capital or slow down R&D.
Use stock to attract acquired teams who want to stay until an IPO or exit.

Equity also signals to investors that the company is still focused on scaling smart — not just spending cash to grab market share.

Tips for using equity well in late-stage private deals

If you’re a buyer:

Offer equity tied to liquidity events. Give sellers a clear timeline for exit (IPO, acquisition, etc.).
Make sure your valuation is defensible. Don’t over-leverage inflated numbers.
Be clear on rights: preferred vs common shares, liquidation preference, and voting power.

If you’re a seller:

Ask about the acquirer’s long-term plan. If you’re taking equity, know how and when you’ll see value.
Confirm whether your shares are subject to the same rights as existing shareholders.
Consider hybrid deals to get some cash up front while riding the future upside.

Equity in late-stage private deals is a balancing act — one that can pay off big when done right.

23. Companies with low cash reserves used equity in 72% of their acquisitions

When your wallet is light, your shares do the talking

Not every tech buyer has deep pockets. Some companies, especially during tight cycles, operate with limited cash. But that doesn’t stop them from doing deals. Instead, they lean on equity — and in 72% of cases, that’s exactly what happened.

This is where stock becomes a lifeline. It lets acquirers keep growing, even when the bank account is slim.

Why equity fills the gap

Low-cash buyers use stock because:

It costs nothing to issue (at least upfront).
It can still be attractive to sellers if the brand or vision is strong.
It helps build relationships with sellers who want to stay involved.

This approach is especially popular among startups, turnaround plays, and smaller strategics with big ambitions.

Making equity-based deals credible

If you’re a low-cash buyer:

Be upfront. Sellers respect honesty. Don’t try to mask a low-cash position.
Highlight your growth plan and how their team will be part of it.
Offer structured vesting or staged equity to build trust.

If you’re the seller:

Look closely at the buyer’s cash flow and growth rate. Are they truly a fit for you?
Don’t give up your company for shares unless you believe in the acquirer’s long-term plan.
Ask for a board seat or observer role — if you’re betting on them, you should have a voice.

Equity is powerful, even without cash. But it only works if it’s backed by clarity, commitment, and a vision you actually want to join.

24. In founder-led tech exits, 69% accepted equity-based consideration

Founders don’t just want money — they want meaning

When a founder sells their company, it’s personal. It’s not just about getting paid. It’s about the future of what they built. That’s why, in nearly 7 out of 10 founder-led exits, the founders accepted stock as part of the deal.

This shows that for many, equity is more than a financial choice — it’s a signal that they still want to be part of the journey.

Why founders say yes to equity

There are several key reasons:

Stock keeps them involved in the next chapter — not just cashed out and gone.
It lets them benefit if the combined company grows or scales faster.
Equity helps them protect the vision. Founders can often negotiate roles or influence when stock is part of the deal.

Cash is final. Equity is a partnership. That matters to mission-driven founders.

How to navigate founder-driven equity deals

If you’re the buyer:

Understand the emotional side of the deal. Founders want to feel respected, not just acquired.
Offer roles post-acquisition that allow real input. Use equity to keep them empowered.
Be clear about what their shares represent — ownership, upside, and influence.

If you’re the founder:

Know what you’re trading for. Will you get board seats? Voting rights? Strategic voice?
Ask for long-term vesting or anti-dilution clauses if you’re taking a big equity chunk.
Think about your team — make sure their options or roles are protected too.

Equity works best when it reflects shared belief. For founders, that can mean more than just the numbers.

25. SPAC mergers in tech were 98% stock transactions during 2021

SPACs ran on stock — almost exclusively

In 2021, the SPAC boom hit its peak — and nearly every tech merger done through a SPAC (98% of them) was structured as an all-stock transaction. That’s because SPACs were designed to use equity from the start.

It was a shortcut to public markets. But it came with trade-offs.

Why SPACs used stock-only structures

SPACs operate differently from traditional M&A:

They raise funds through IPOs, but often keep most of that cash in reserve.
Their goal is to merge with a private company and offer public shares as consideration.
Founders and investors in SPACs want to keep as much capital on hand as possible.

Stock-only deals make that possible. But they also mean the seller takes on more risk — since their payout depends on post-merger performance.

Lessons from SPAC equity deals

If you’re considering a SPAC route as a seller:

Study the SPAC’s team, backers, and post-merger plan. You’ll be joining them, not just selling.
Prepare for volatility. Many SPAC shares drop sharply after the merger.
Ask about lock-ups, registration rights, and liquidity timing.

If you’re the SPAC sponsor or acquirer:

Build trust with your target early. They’re taking stock — not just a payday.
Have a clear path to revenue growth, product delivery, and shareholder returns.
Use performance-based equity to keep leadership focused post-merger.

SPACs are driven by stock — but without a solid foundation, the equity can lose value fast.

26. Stock-based deals were 40% more common in high-growth sectors like cloud and SaaS

Growth attracts equity like a magnet

Fast-growing sectors like cloud computing and SaaS don’t just lead in innovation — they also lead in stock-based deals. In fact, equity deals were 40% more common in these areas than in slower-moving tech verticals.

That’s because speed, scale, and future value drive how these companies think — and how they get acquired.

Why equity dominates in growth-focused tech

There are a few big reasons:

Cash is rarely available in high-growth startups — it’s all reinvested.
Valuations are based on potential, not just revenue — stock reflects that better.
Equity helps retain key product and engineering teams who might otherwise jump ship.

Cloud and SaaS buyers also prefer equity because it allows faster dealmaking without slowing down internal development.

Structuring equity smartly in growth sectors

If you’re acquiring:

Use equity to win deals without sacrificing capital for your own expansion.
Combine stock with performance goals — so value is created, not just promised.
Communicate your roadmap clearly to the acquired team. That keeps them engaged.

If you’re selling:

Understand your new role. Are you expected to lead a product, integrate fast, or stay long term?
Ask for equity liquidity timelines. When can you sell, and under what conditions?
Be sure the buyer’s vision aligns with how you’ve grown your company — equity ties you to them now.

In fast-growth sectors, equity is the currency of trust. But it only works when goals — and cultures — match.

27. Convertible stock structures were used in 23% of hybrid tech M&A deals

Not just stock — smart stock

Equity deals aren’t always plain vanilla. In about 23% of hybrid tech M&As, buyers used convertible stock — a structure that starts as one thing and becomes another later.

This is especially helpful when there’s uncertainty about valuation, integration, or post-deal performance. Convertible equity offers flexibility while protecting both sides.

Why convertible stock works

Convertible structures usually start as preferred shares or debt, and convert to common stock under certain conditions. That could include:

Hitting revenue targets
Staying for a set amount of time
Going public or raising another round

They’re great tools when:

The buyer isn’t ready to fully commit to a valuation
The seller wants protection in case things go wrong
Both sides want skin in the game but also a safety net

How to use convertible stock in M&A

If you’re the buyer:

Use convertible equity when you need flexibility but still want to close fast.
Tie conversions to real performance, not vague promises.
Make sure the structure is simple — don’t overcomplicate it with legal jargon.

If you’re the seller:

Understand all the triggers. When does the conversion happen? What changes?
Ask for downside protection. If things don’t go well, you should still get value.
Make sure the convertible doesn’t delay your exit too long or too much.

Convertible stock offers options — but only when everyone knows the rules. Write them down, talk them through, and get aligned early.

28. Stock-based earnouts were present in 31% of equity tech M&As

Equity with a twist: performance matters

Not all stock in a tech M&A deal is handed over on day one. In 31% of equity-based deals, earnouts were used — meaning sellers only receive part of their stock if certain conditions are met after the acquisition closes.

This makes sense. Buyers want to protect themselves. Sellers want to prove the value they’re bringing. Stock-based earnouts let everyone meet in the middle.

Why earnouts work — and when they don’t

A stock earnout is basically a performance contract. Common triggers include:

Hitting revenue or customer targets
Retaining key staff
Completing specific product development milestones

These structures work best when:

Both sides are aligned on what success looks like
The time window is realistic (12 to 24 months is typical)
There’s trust that the acquirer will support — not hinder — goal achievement

How to handle stock earnouts properly

For buyers:

Set targets that are achievable and objective. If they feel like traps, trust will evaporate.
Support the acquired team with resources to hit those milestones.
Communicate clearly how the earnout will be measured — and when it will be paid.

For sellers:

Ask for fair timelines. Rushing to hit a goal in 6 months won’t work if integration is slow.
Be clear on what you control. If the buyer makes changes that affect performance, your earnout shouldn’t suffer.
Try to include partial triggers — so even hitting 80% of a goal earns something.

Stock earnouts create alignment. But only if the rules are set early and the partnership stays strong.

29. Cash-heavy deals had a 12% higher post-merger attrition rate in the tech sector

More cash, more exits

This one’s important. In tech M&A, deals that paid mostly in cash saw 12% more team departures after closing compared to equity-heavy deals. That means people took the check — and left.

That’s not surprising. Cash creates closure. Equity creates commitment.

Why teams leave after cash deals

Here’s what happens:

Once employees or founders get paid, they may feel done — especially if they have no skin in the future company.
Without stock or incentives to stay, retention falls.
Integration may feel more like a handover than a shared mission.

In contrast, stock encourages people to stick around, grow, and invest themselves in what comes next.

How to manage attrition based on deal structure

If you’re buying:

Don’t assume cash alone will buy loyalty. It often buys a quick exit.
Use equity as a carrot — especially for key roles in product, engineering, or sales.
Build culture fast. Even a strong retention package can fail without purpose.

If you’re selling:

Think beyond the payout. If you want your team to thrive post-acquisition, ask for retention plans or stock-based incentives for them.
Include team loyalty in your negotiations — not just your own terms.
Be honest with your people about what changes are coming. Surprises push people out the door.

The goal isn’t just buying a company — it’s keeping the people who made it worth buying.

30. From 2020–2024, the average tech M&A had 57% of its value in stock consideration

The final figure: stock is now the norm

Looking across a four-year window, the average tech M&A deal included 57% stock. That’s not a blip. It’s the new baseline.

Buyers and sellers are both recognizing that equity has real advantages — flexibility, alignment, and long-term growth. While every deal is different, the trend is clear: tech M&A is no longer just about the cash.

What this means going forward

This shift tells us a few things:

Sellers are more comfortable holding stock than ever before.
Buyers prefer to keep their cash for operations, innovation, or multiple acquisitions.
Equity creates lasting ties — and those ties are increasingly valuable in fast-changing markets.

It’s not about replacing cash. It’s about using the right tool for the right outcome.

Final guidance on structuring equity-based deals

For buyers:

Make stock work harder by tying it to performance, retention, and shared success.
Be transparent about what sellers are getting — rights, risks, and responsibilities.
Combine stock with strong onboarding and integration strategies.

For sellers:

View stock not just as payment, but as partnership.
Study every term — vesting, liquidity, rights, dilution — like your future depends on it.
Know your own timeline. Stock takes time to pay off, so plan accordingly.

Equity isn’t just currency — it’s commitment. And now, it’s at the heart of most tech M&A deals.

Conclusion:

Over the past few years, tech M&A has changed — and it’s changed fast.

Cash used to be the clear favorite. But now? Stock is everywhere. From startup acqui-hires to billion-dollar mega-mergers, equity has become the go-to tool for smart, strategic deals.