What happens to your shares when a company is acquired for cash

A cash merger is an acquisition in which the buyer pays cash for the target's shares. It's also called an all-cash, cash-for-stock or cash-out merger.

The target is the company being bought. The price per share is the offer price, and the cash is the deal's consideration.

For example, Northwind agrees to buy Acme for $40.00 a share in cash. Acme's shares usually keep trading while the deal is pending, often a little below $40.00.

That gap is the spread. It reflects the time until the cash arrives and the chance that the deal fails.

When the deal closes, each Acme share becomes the right to receive $40.00 in cash. Trading usually stops then, though it may stop before closing. The stock is later delisted.

This guide covers cash deals for US-listed companies under the usual US rules. Some foreign companies are exempt from parts of them. Where state law matters, it follows Delaware's, and other states differ.

Deals paid wholly or partly in stock follow other rules. So do employee options and RSUs, and private-company tenders.

Most cash deals close by a merger vote or by a tender offer. The deal's announcement usually says which.

A deal put to a vote, like Acme's, usually runs in this order:

1. 1

   Record date

   Holders on the record date can vote, but the cash goes to whoever holds the shares at closing.

2. 2

   The vote

   For a Delaware company, Section 251(c) requires votes for the deal from a majority of the outstanding stock entitled to vote. Under that vote threshold, a share that isn't voted counts like a vote against. The company's charter, its founding document, or the agreement may ask for more.

3. 3

   Approvals

   Regulatory approvals and other closing conditions may still be pending, so closing can come months after the vote.

4. 4

   Closing

   Each Acme share converts into the right to receive the cash at the effective time. That is usually when the certificate of merger is filed with the state.

A holder of 100 Acme shares at closing receives $4,000 (100 × $40.00), less any tax withheld or broker fee.

The agreement lists shares that don't convert. They usually include shares the buyer or the target itself owns, and shares whose holders have properly demanded appraisal. Deals with an insider rollover usually also exclude the rolled-over shares.

In a tender offer, the buyer offers to buy the shares directly. To tender shares is to accept that offer. The holder agrees to sell them to the buyer if the offer completes.

For example, Contoso offers $25.00 a share in cash for all of Fabrikam's shares. The usual order:

1. 1

   The offer starts

   Contoso sends holders an Offer to Purchase with the price, the conditions and the expiration time.

2. 2

   The target's position

   Under Exchange Act Rule 14e-2, Fabrikam must usually tell holders its position on the offer within 10 business days of its start. In a 10-day offer, it's the next business day. It may recommend accepting or rejecting the offer, stay neutral or say it can't take a position, and must give its reasons.

3. 3

   The offer period

   Under Exchange Act Rule 14e-1, the offer must usually stay open at least 20 business days, which exclude weekends and federal holidays. Since April 16, 2026, an agreed all-cash offer for all the shares can stay open 10. Buyers often extend offers.

4. 4

   Expiration

   If holders tender enough shares to meet the minimum tender condition, and the other conditions are met or waived, Contoso buys them. If the offer ends without a purchase, Contoso returns the tendered shares.

5. 5

   The second step

   If Fabrikam is a Delaware company and the agreement uses Section 251(h), a merger follows as soon as practicable. Holders don't vote on it unless the charter requires a vote. The shares not tendered, apart from the agreement's exceptions, then get the same cash per share as in the offer.

A holder who tenders 200 Fabrikam shares receives $5,000 (200 × $25.00), less any tax withheld or broker fee. The cash comes once Contoso pays for the shares.

The two paths differ for the holder. In a vote deal, the merger converts the shares whatever each holder did, apart from listed exceptions. In a tender offer, each holder chooses whether to sell.

A mini-tender offer is a bid for a small stake. It usually leaves the bidder owning 5% or less of a class of the company's shares. It may pay below the market price, and the bidder doesn't have to let holders withdraw tendered shares.

A company's tender offer for some of its own shares, a buyback, works differently. Usually no merger follows, and shares not tendered stay with the holder.

In legal writing, a cash-out merger can also mean a freeze-out or squeeze-out: a controlling holder buys out the minority holders for cash. Such a deal can be a going-private transaction.

In a vote deal, shares at a broker usually need nothing from the holder to be paid. Brokers usually treat a cash merger as a mandatory corporate action, which needs no instruction. They usually treat a tender offer as a voluntary one.

Voting isn't needed to receive the cash. Every share converts at closing whether or not its holder voted, apart from the agreement's exceptions.

Holders who want a court to set their shares' fair value instead must act before the vote. They do so under their appraisal rights.

Holders with enough votes approve some deals by written consent instead, with no meeting. Other holders get an information statement describing the deal at least 20 calendar days before the deal can take effect.

Payment depends on how the shares are held:

At a broker

Shares in a brokerage account, often called street name. The broker usually handles the payment, with nothing for the holder to send.

Registered, without certificates

Shares in the holder's own name on the company's records, usually kept by its transfer agent, which sends account statements. Some agreements pay these holders automatically. Others first mail a letter of transmittal, a form the holder signs and returns to claim the cash.

Paper certificates

Holders usually get a letter of transmittal after closing. They're paid once they return it with the certificates. For a lost certificate, the agreement usually asks for an affidavit of loss, and sometimes a bond.

In a tender offer, each holder chooses whether to accept it. A broker usually tenders nothing without the holder's instruction.

Each choice has its own result:

Tender

Holders with shares at a broker tender through the broker, whose own deadline usually comes before the tender offer expiry. If the offer completes, the buyer pays for the tendered shares.

Withdraw

Under Exchange Act Rule 14d-7, holders can withdraw tendered shares while the offer is open. Holders with shares at a broker withdraw through the broker, whose deadline may also come before the expiry. Some offers add a subsequent offering period, extra days to tender, and the buyer doesn't have to allow withdrawals then.

Don't tender, or do nothing

A holder who gives no instruction hasn't tendered. If the offer completes, a second-step merger usually follows. These shares then usually convert into the same cash, paid only if that merger closes. So not tendering usually means being paid later at the same price, not keeping the shares.

Sell in the market

The holder receives the market price, which is usually a little below the offer price. Like most US share trades since May 28, 2024, the sale settles one business day later, when the cash is paid.

The cash comes after the deal closes, not after the announcement or the vote. For shares tendered in a tender offer, it comes after the buyer accepts them when the offer ends.

The companies' expected close is an estimate, not a payout date.

At or before closing, the buyer usually deposits the cash with a paying agent. That's a bank or trust company it appoints to pay holders.

For shares at a broker, the paying agent usually sends the cash to the brokers. It usually goes through the central depository that holds their shares.

Merger agreements usually require prompt payment after closing, without interest, so holders earn nothing for the wait. A broker usually credits the cash once it receives the funds.

In a tender offer, Exchange Act Rule 14e-1 requires the buyer to pay, or return the shares, promptly after the offer ends. The rule doesn't define promptly. Guidance the SEC issued in 2000 ties it to the usual settlement time for trades, then three business days.

If the payment hasn't arrived, these are some possible reasons:

The deal hasn't closed

In a tender offer, the offer may still be open after an extension. The company usually announces the closing in a press release and an SEC filing.

The shares weren't tendered

In a tender offer, the buyer pays for shares not tendered only once the merger that follows the offer closes.

The broker is still processing

Some brokers remove the shares and add the cash on different days. The broker can say whether it has received the funds.

Registered or certificate shares

The paying agent pays these holders, not a broker. It may first need the letter of transmittal and the papers it asks for. That letter usually names the agent.

Cash that registered or certificate holders leave unclaimed usually goes to the company that survives the merger. That happens after a period the agreement sets. Later, it may pass to the state.

Brokers call an event like a merger or a tender offer a corporate action. Each broker uses its own words. The common ones:

Mandatory corporate action

The usual label for a cash merger. It applies to every holder, and the broker asks for no instruction. After a tender offer, the merger for shares not tendered may show this way too. The label alone may not mean the deal has closed.

Voluntary corporate action

The usual label for a tender offer: the holder takes part by instructing the broker. With no instruction, the broker usually doesn't tender the shares.

Election deadline

The broker's own last day for instructions. It usually comes before the tender offer expiry.

Cash merger

The event that removes the shares and adds the cash, sometimes on different days. The cash is the price per share times the shares held, less any tax withheld or fee.

Reorganization fee

Some brokers charge a fee to process a merger or a tender offer, and others charge nothing.

Trading suspended, then delisted

Trading usually stops at closing, when the exchange suspends it. By then each share is only the right to the cash, so the delisting doesn't change what holders receive. The exchange, or sometimes the company, then files a Form 25 to end the listing. The delisting usually takes effect 10 days after the filing.

For US federal income tax, cash received for shares in a tender offer or a cash merger is usually treated as a taxable sale.

The gain or loss is the full price for the shares, less any selling costs, minus the holder's basis. The basis is usually what the holder paid.

A gain or loss is long-term if the shares were held more than one year at the sale or conversion. Otherwise it's short-term.

Inherited and gifted shares have their own basis and holding-period rules: inherited shares usually count as long-term, however briefly they were held.

Capital losses offset capital gains. After that, up to $3,000 a year of net loss ($1,500 if married filing separately) can offset other income.

For shares at a broker, the broker reports the gross proceeds on Form 1099-B.

A holder may have to give the payer a taxpayer identification number. If a required number is missing, the payment generally faces 24% backup withholding, unless an exemption applies. This counts as federal income tax withheld on that year's return.

These rules don't apply to shares held in an IRA or a 401(k). There, the cash usually stays in the account, which follows its own rules.

State taxes may also apply.

A signed deal can still change before closing. The agreement and the law decide what follows:

A new price

The parties sign an amendment, and the price can go down as well as up. For a Delaware company, the board can't change the price by amendment after holders approve the deal. A new price then needs holders' approval again.

A new price in a tender offer

The tender offer must usually stay open at least 10 business days after the change is announced. A 10-day offer must announce it by the fifth business day before it ends. Under Section 14(d)(7) of the Exchange Act, holders whose shares the buyer buys get the higher price, even if they tendered before the raise.

A rival bid

A competing offer changes nothing by itself. The target's board can take it only as the agreement allows, often after the first buyer gets a chance to match. The target then usually pays the first buyer a termination fee, and a new agreement replaces the first.

A delay

Passing the outside date, the last date the agreement sets for closing, doesn't end the deal by itself: it usually gives either side the right to end the agreement. Many agreements allow an outside date extension while approvals are pending.

A failed deal

In a deal break, the agreement ends and holders receive nothing from the deal. The shares keep trading, and the price may fall if it had assumed the deal would close.

Dividends

Some agreements allow dividends while pending: the target may keep paying its regular dividends, often up to a limit. Each one still needs the board to declare it. Others bar them unless the buyer agrees.

Holders who don't accept the price may have appraisal rights. That's the right to ask a court to set their shares' fair value. For a Delaware company, Section 262 of Delaware law gives these rights in a cash merger, even for listed shares.

To seek appraisal in a vote deal, the holder's separate written demand must reach the company before the vote. A vote against doesn't count as a demand.

The holder must not vote for the merger. They must also keep the shares through closing, so selling them ends the right.

In a tender offer, shares sold to the buyer in the offer no longer qualify for appraisal.

A Section 251(h) merger after a tender offer usually has no vote. There, the appraisal demand deadline is the later of the offer's completion and 20 days after the appraisal notice. The company sends holders that notice.

In a deal approved by written consent, the demand is due within 20 days after that notice.

For listed shares, in most mergers the court must dismiss the case unless enough shares seek appraisal. Together, they must exceed 1% of the outstanding shares of their class or series, or $1 million at the deal price.

Fair value can come out above, at or below the deal price. These holders usually wait for the court instead of being paid at closing. If no court petition covers their shares within 120 days after the merger takes effect, the right ends.

Other states set their own rules, and some give no appraisal rights for listed shares in most cash deals.