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

Usually in that scenario the Company A shares given to Company B will be distributed pro rata to Company B’s current shareholders (unless any of them decide to be bought out instead). So then those shareholders hold shares of Company A instead of Company B.