Where does the money go when an acquired company is bought with shares of the buyer

Question

That was a bit of an odd question to try and phrase so thank you for bearing with me.

So, say I’m Company A and I am buying Company B.

Sure, there could be cash involved, but I am going to fund 90% of the acquisition by giving Company B common stock in my company.

When the merger is completed, wouldn’t those shares just be Company A’s anyway? And if Company B is then considered the largest shareholder because of the transaction, what would happen if Company B just decides to sell all of its shares?

In: 4

Answer 1

When you buy company B, you pay the owners of company B. The owners of company B are its shareholders. So the cash and stock that is used to buy company B goes to the shareholders of company B.